1. Chapter 13 1231 & Recapture

2. Special Tax Rate for LTCG zHistory zCurrent

3. Definition of Capital Asset z 1221: not cap asset z Court cases z Other IRC Sections

4. Holding Period (LT > 1 yr) y> 12 mos y  18 mos - 1997 only ytacking yshort sales

5. Netting of CG’s & CL’s Noncorporate T/P zStep 1 - net S/T v. S/T, L/T v. L/T zStep 2 - if opposite signs, net S/T v. L/T, NCG if LTCG zNCG alternative tax computation zC/L c/o

6. 1231 Assets zDefinition zExcluded Property - including not held LT (LT>1yr) zNonpersonal use property - net casualty losses and gains z1231 netting

7. 1245 Recapture zFull recapture zNon real estate (167,168,179,197;1056 - sports franchise player K’s - limited in alloc to 50%) zNonresidential real estate 81-86 (ACRS 15,18,19)

8. 1250 Recapture zAdditional depreciation subject to recapture = excess over S/L zNonresidential real estate - 100% additl deprec after 69-81 zResidential real property - y69-75 addit’l deprec x (100% - 1% per mo >100)

9. z 75 - recapture 100% of additional depreciation > excess over S/L z MACRS 87 - no recapture (S/L)

10. Recapture special rules zCharitable contributions zcorporate sales of R/E: 1250 & 291 (20% x 1245-1250) (Tax 2) zSales between related parties - 1239 zReporting - Forms 4797, 4684

11. Unrecaptured 1250 Gain (25%/15% CG) zDepreciable R/E - CG that would be OI if 1245 did apply (minus 1250 OI) is taxed at 25%/15% - rest CG taxed at reg CG rate (e.g. 20%/10%)

12. Constructive sale (new 1259) “Appreciated financial Position” e.g., “Short sales against the box” zPreviously G or L not recog’d until closed zGain now recognized on short sale Constructive gain added to basis - For subseq sale (i.e., when transac closed) zCaution - may not recog L zEffective date - after 6/8/97