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is without merit. Petitioners’ claim is made without a clear
understanding of section 1(h) and its interaction with section
1250.
For the 1997 tax year, the maximum capital gains rate is
generally 20 percent on the gain from the disposition of a
capital asset held more than 18 months and sold after July 28,
1997. However, the 20-percent rate does not apply to
unrecaptured section 1250 gain, which is subject to a 25-percent
tax rate. See sec. 1(h)(1)(B).
Pursuant to the pertinent part of section 1231(b), “property
used in the trade or business” means real property used in a
trade or business, held for more than 1 year, and subject to the
allowance for depreciation. Since petitioners’ investment
property meets these criteria, the property is section 1231
property. Pursuant to section 1231(a)(3)(A)(i), the term
“section 1231 gain” means any recognized gain on the sale or
exchange of property used in a trade or business. Likewise, the
term “section 1231 loss” means any recognized loss from a sale or
exchange of property used in a trade or business. Sec.
1231(a)(3)(B). If, as here, the section 1231 gains exceed the
section 1231 losses for the year, the gains and losses shall be
treated as long-term capital gains and long-term capital losses,
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