what is capital gains tax?

CCS

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I know it is on increased capital, but for whom? is that all it is for? Is it just when you sell something, or also when you first build it?

I mean, lets say a factory buys a new machine to add to their assymbly line:
Are they taxed capital gains then since they have more capital, or are they only taxed it if they sell that machine or that company later?

Conservatives keep saying Obama will tax companies. What transactions exactly are they refering to?


And is a windfalls profit tax one that takes all money you make above a certain amount, or it an additional percent tax on profit above 10% per year?
 

iamnaked

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Capital gains tax is payable on appreciation from capital items in your portfolio. If you buy something and it goes up in value before you sell it, you are liable to pay tax on the difference between the two prices. Also if people give you large amounts of cash you typically have to pay capital gains on that too. Windfall taxes I don't know too much about
 

Old Baldy

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Go to IRC section 1(h) on the internet.

Essentially, if you sell property held for more than one year, you fall under the 15 percent capital gains rate rather than the average 28 percent income tax rate.

Domestic dividend income, and some qualifying foreign dividend income, also fall under this favorable income tax rate.

IIRC, the rate goes up to 20 percent for most people after calendar year 2010.

You calculate this beneficial tax rate on Schedule D if you are an individual. (Schedule D is the schedule where you calculate your short term and long term capital gains.)

Short term capital gains (i.e., assets held for one year or less when sold) are not allowed this beneficial tax rate.

I think it is IRC section 1(h)(1)(C) that sets the 15 percent rate IIRC and section 1(h)(11) for the dividend definition IIRC.

Here's some boring reading for you:
http://www.taxalmanac.org/index.php/Sec._1

The old windfall profits tax on oil decades ago ran up to around 70 percent for the major producers and 50 percent for the independents IIRC? I don't know of any windfall profits tax enacted since the late 1980's IIRC. I think the old oil windfall profits tax expired around 1988.

Btw, this was an excise tax, not an income tax. It seriously hurt our domestic drilling industry and was repealed about 10 years after enactment.

Corporations essentially do not pay tax on dividends received, etc. Obama will supposedly repeal that section? I don't know if that is political talk but I think it may be because the basic beneficial dividends received deduction has been around for a very long time. (This prevents triple taxation, so I wouldn't think Obama would repeal it. Probably just political talk.)

I'd have to do some research to remember this tax treatment because it has been around for so long, it was hardly ever an issue when I was working. (Oh, you might have gotten an income recharacterization issue now and then, but it was very rare from the cases I worked.)

You might see something further limiting golden parachutes and their corresponding deductions more in the future though.
 

swingline747

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Capital gains tax is payable on appreciation from capital items in your portfolio. If you buy something and it goes up in value before you sell it, you are liable to pay tax on the difference between the two prices. Also if people give you large amounts of cash you typically have to pay capital gains on that too. Windfall taxes I don't know too much about

isnt that just the tops?
 
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