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IRS.gov Website
Publication 544
taxmap/pubs/p544-011.htm#en_us_publink100072476

Chapter 2
Ordinary or Capital Gain or Loss(p22)


taxmap/pubs/p544-011.htm#en_us_publink1000276603Introduction

You must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). You must do this to figure your net capital gain or loss.
For individuals, a net capital gain may be taxed at a different tax rate than ordinary income. See Capital Gains Tax Rates in chapter 4. Your deduction for a net capital loss may be limited. See Treatment of Capital Losses in chapter 4.
taxmap/pubs/p544-011.htm#en_us_publink100072477

Capital gain or loss.(p22)

rule
Generally, you will have a capital gain or loss if you sell or exchange a capital asset. You also may have a capital gain if your section 1231 transactions result in a net gain.
taxmap/pubs/p544-011.htm#en_us_publink100072478
Section 1231 transactions.(p22)
Section 1231 transactions are sales and exchanges of real or depreciable property held longer than 1 year and used in a trade or business. They also include certain involuntary conversions of business or investment property, including capital assets. See Section 1231 Gains and Losses in chapter 3 for more information.

taxmap/pubs/p544-011.htm#TXMP5a15ed28

Useful items

You may want to see:


Publication
 550 Investment Income and Expenses
Form (and Instructions)
 Schedule D (Form 1040): Capital Gains and Losses
 4797 : Sales of Business Property
 8594 : Asset Acquisition Statement Under Section 1060
 8949: Sales and Other Dispositions of Capital Assets
See chapter 5 for information about getting publications and forms.
taxmap/pubs/p544-011.htm#en_us_publink100072479

Capital Assets(p22)

rule
Almost everything you own and use for personal purposes, pleasure, or investment is a capital asset. For exceptions, see Noncapital Assets, later.
The following items are examples of capital assets.
taxmap/pubs/p544-011.htm#en_us_publink100072480

Personal-use property.(p22)

rule
Generally, property held for personal use is a capital asset. Gain from a sale or exchange of that property is a capital gain. Loss from the sale or exchange of that property is not deductible. You can deduct a loss relating to personal-use property only if it results from a casualty or theft.
taxmap/pubs/p544-011.htm#en_us_publink100072481

Investment property.(p22)

rule
Investment property (such as stocks and bonds) is a capital asset, and a gain or loss from its sale or exchange is a capital gain or loss. This treatment does not apply to property used for the production of income. See Business assets, later, under Noncapital Assets.
taxmap/pubs/p544-011.htm#en_us_publink100072482

Release of restriction on land.(p22)

rule
Amounts you receive for the release of a restrictive covenant in a deed to land are treated as proceeds from the sale of a capital asset.