Categories

Thursday, October 31, 2013

Large One-time Capital Gain

1 : We wanted to know if there was a chance that in the 2013 tax year we could have between $200,000 to $1,000,000 in capital gains from sales of securities (held short-term), if there were anything we could do in advance (I already purchased the securities in question in my personal brokerage account this year, but haven't yet sold them) to minimize taxes on the gains, short of selling them in 2014 or later, or do I just have to pay capital gains tax at the maximum rate.

2 : We heard that we might get a lower tax bill if we completed the AMT form, but we are unsure. We file a joint return (My wife and I are in our 40s - 50s and we have 4 children, only 1 of which is still under 17 years old) and my wife and I will have about $57,000 in salary income in 2013.

3 : Please advise whether we should use the regular (or high income) 1040 tax tables with whatever gain figures come from Schedule D or possibly use another method to compute our tax liability to save us more money.

Answer :

1 : When you sell a capital asset like a stock or a home you own, the difference between the amount you sell it for and what you paid for it , cost basis, is classified as a capital gain or a capital loss. Capital gains and losses are further classified as long-term or short-term, depending on how long you held the investment before you sold it. As you held the securities for one year or less, your capital gain or loss is considered short-term. Based on the duration of asset ownership and the tax filers personal tax rate, we can calculate their capital gains tax rate. For 2012 this is shown in the table below. In 2013, Short term gains will be taxed at 2013 marginal tax rate levels. Short-term capital gains tax like ordinary income at tax rates up to 35% for 2012 (and 39,6% in 2013). You could hold the options for a year or more so that they qualify as long term gains. You could sell other things , capital assets , at a loss so that your total net capital gain for the year is reduced to offset the losses. OR you can give your assets to your child as a gift; the IRS offers taxpayers a golden opportunity to give substantial and meaningful gifts up to $14K for 2013 I guess annually (or $28K if you give jointly with your spouse). In this case, you do not need to file gift tax return form 709 UNLESS the amount of the gift exceeds $14K for 2013.Even if you need to file form 709, UNLESS the total amount of your gifts (or cumulative amount) doesn’t exceeds $5.25 million for 2013, you do not need to pay any tax money on the gift.

2 : On the contrary, as long as you are subject to AMT, this means that you need to pay more tax to the IRS as AMT=TMT-Reg tax liability; The AMT is an extra tax some people have to pay on top of the regular income tax. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax.

3 : Once you determine whether your gain or loss is short-term or long-term, it's time to enter the transaction specifics in the appropriate section of Form 8949. All transactions require the same information, entered in either Part 1 (short term) or Part 2 (long term), in the appropriate alphabetically designated column. For most transactions, you'll complete: The name or description of the asset you sold. When you obtained it. When you sold it. What price you sold it for. The asset's cost or other basis. You need to total your entries on Form 8949 and then transfer the information to the appropriate short-term or long-term sections of Sch D and 1040 line. You need to complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 On that tax schedule you'll subtract your basis from the sales price to arrive at your capital gain or loss.

Visit Asktaxguru for Online tax help

No comments:

Facebook Blogger Plugin: Bloggerized by AllBlogTools.com Enhanced by MyBloggerTricks.com

Post a Comment

Related Posts Plugin for WordPress, Blogger...