Tax Strategies Flashcards

Gains and losses on Section 1256 contracts, such as regulated futures, are taxed as:

Answer: 60% long-term and 40% short-term regardless of holding period

Section 1256 contracts are marked to market and get 60/40 long-term/short-term treatment.

Which Internal Revenue Code section allows exclusion of gain on qualified small business stock?

Answer: Section 1202

Section 1202 lets eligible holders exclude some or all of the gain on qualified small business stock.

After the Tax Cuts and Jobs Act, Section 1031 like-kind exchanges are available only for:

Answer: Real property held for business or investment

Since 2018, like-kind exchange treatment is limited to real property.

Shorting stock you already own ('short against the box') to lock in a gain triggers which rule?

Answer: Constructive sale rule under Section 1259

Section 1259 treats such hedges as a constructive sale, so the gain is recognized immediately.

A client donates publicly traded stock held three years to a public charity. What is the main tax benefit?

Answer: A deduction at fair market value with no tax on the built-in gain

Donating long-term appreciated securities gives a fair market value deduction and avoids capital gains tax.

What is the maximum federal rate on unrecaptured Section 1250 gain from depreciable real estate?

Answer: 25%

Unrecaptured Section 1250 gain, the part tied to prior straight-line depreciation, is capped at 25%.

What is the maximum federal long-term capital gains rate on collectibles such as art or physical gold?

Answer: 28%

Long-term gains on collectibles are taxed at a maximum rate of 28%.