Fundamentals of Capital Gains: Identifying Section 1231, 1245 and 1250 Gains, 0% Bracket and Form 4797

Capital gains taxation is one of the more complex, most often litigated areas of taxation. Most taxpayers want to take advantage of the lowest possible capital gains rate. However, capital gains tax rates are graduated, similar to regular tax rates. Practitioners and taxpayers are sometimes pleasantly surprised, or shocked, to discover they can take advantage of a 0% capital gains tax rate via careful planning or luck. In 2019, married taxpayers filing joint returns can avoid capital gains when taxable income is under $78,750.

Electing to tax-qualified dividends and long-term capital gains at ordinary rates can free-up investment interest carryforwards. Making this election often results in substantial current tax savings for taxpayers, but when should the election be made, and should the deduction be maximized?

Perhaps the most perplexing area of capital gains taxation is the categorical taxation of the sales under Sections 1250, 1245, and 1231. Separating a sale appropriately can be a daunting task. Planning for 1245 and 1250 recapture, categorizing taxable gains appropriately, and being mindful of the 1231 five-year lookback are all necessary steps to calculate the tax effect of gains on the disposition of assets.

Listen as our panel of experts reviews the most complex areas of capital gains tax, including taking advantage of the 0% bracket, calculating recapture, the investment interest election, and Form 4797 reporting of these transactions.

1. Capital gains: an overview
2. Distinguishing and calculating Section 1231, 1245, and 1250 gains
3. Taking advantage of the 0% capital gains bracket
4. Electing to maximize the investment interest deduction
5. Section 1231 lookback
6. Other capital gains strategies

The panel will review these and other vital issues:

• Distinguishing between Section 1231, 1245, and 1250 gains
• Electing to maximize the investment interest expense deduction
• Completing Form 4797 for capital gains and losses
• Utilizing the 0% capital gains bracket

Learning Objectives

After completing this course, you will be able to:

• Distinguish between Section 1245 and Section 1250 recapture
• Determine when a taxpayer qualifies for 0% capital gains
• Ascertain whether maximizing the investment interest is advisable
• Decide when Section 1231 lookback applies

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and sole proprietorships, qualified business income, net operating losses and loss limitations; familiarity with net operating loss carry-backs, carry-forwards and carried interests.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).