Tax Planning Goals

1
Tax Planning Goals

• Avoiding income recognition
• Postponing income recognition
• Changing tax jurisdictions
• Controlling classification of income
• Spreading income among related taxpayers
• When to act contrary to usual techniques

2
Property Transactions

• Amount Realized
• Adjusted Basis
• Gain/Loss Realized
• Gain/Loss Recognized

Recognized Excluded Postponed
Ordinary Capital
Active Passive Portfolio
3
Capital Assets Are Not

• Inventory
• Receivables from trade/business
• Depreciable property
• Creative works of the taxpayer, or received by
  gift from him/her
• US government publications

4
So Capital Assets Are

• Held for investment
• Personal use
• Other statutory exceptions
• Held by securities dealer
• Subdivided real estate
• Nonbusiness bad debts

5
Stock Option

• Granted / Sold
• Sale / Exercise / Lapse
• Sale

6
Capital Gain/Loss

• Noncorporate Taxpayer
• LTCG 0/5/15 tax rate
• Net CL Max deduction 3000 per year
• Carry forward only, does not expire, as ST or LT
• STCG Tax as ordinary income
• C Corporate Taxpayer
• CG Tax as ordinary income
• CL No deduction Cback 3, Cfwd 5, as ST

7
Business Assets

• 1231 assets real or depreciable, trade or
  business, held long term
• Net gain is capital
• Net loss is ordinary
• Overrides Depreciation recapture
• Personal property, recapture all depreciation
• Real property, recapture accelerated depr only.
  But then tax
• 20 of remaining gain for corporations
• Rest of gain at 25 for other taxpayers