Income
 
INVESTMENT INCOME
 
How much am I allowed to deduct as a capital loss this year?
  If your capital losses are more than capital gain, you can a claim capital loss deduction. Your allowable capital loss deduction for any tax year, figured on Schedule D, is limited to the lesser of:

1. $3,000 ($1,500 if you are married and file a separate return), or

2. Your capital loss as shown on line 16 of Schedule D.

If you have a capital loss on line 16 of Schedule D that is more than the yearly limit on capital loss deductions, you can carry over the un used part to later years until it is completely used up.
 
What is maximum Capital Gain tax rate?
  The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income .These lower rates are called the maximum capital gain rates.
The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss.
 
 
What is Capital Asset?
  Most property you own and use for personal purposes, pleasure, or investment is a asset. For example, your house, furniture, car, stocks, and bonds are capital assets. Capital asset is any property held except the following:
  • Stock in trade or other property included in inventory or held mainly for customers.
  • Accounts or notes receivable for services performed in the ordinary course your trade or business or as an employee, or from the sale of stock in trade or property held mainly for sale to customers.
  • Depreciable property used in trade or business, even if it is fully depreciate.
 
If my capital losses exceed my capital gains, then balance amount can be adjusted from my other income?
 
Yes, you can adjust your balance capital gain loss (that is after adjusting from capital gain) from your other income but there is an limit of $3000($1500 if Married filling separately) & rest of the loss can be carried forward to later years to adjust from capital gains or ordinary income until it is completely used up.
 
What is the basis of property received as a gift?
  To figure the basis of property you get as a gift, you must know its adjusted basis to the donor just before it was given to you. You also must know its fair market value (FMV) at the time it was given to you. If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or loss when you dispose of the property. Your basis for figuring gain is the same as the donor's adjusted basis, plus or minus any required adjustments to basis while you held the property. Your basis for figuring a loss is the FMV of the property when you received the gift, plus or minus any required adjustments to basis while you held the property. You have to note that figure your basis in property that you received as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value at the time it was given to you, the amount of any gift tax paid on it, and the date it was given to you.
 
How do I figure the cost basis when the stocks I am selling were purchased at various times and at different prices?
  If you can identify which shares of stock you sold, your basis is what you paid for the shares sold plus sales commissions. If you sell a block of the same kind of stock, you can report all the shares sold at the same time as one sale, writing VARIOUS in the date acquired column. However, what you enter into the cost or other basis column is the total of all the acquisition costs of the shares sold. If you cannot adequately identify the shares you sold and you bought the shares at various times for different prices, the basis of the stock sold is the basis of the shares you acquired first (first in first out). Except for certain mutual fund shares, you cannot use the average price per share to figure gain or loss on the sale of stock.

Short-term capital assets:
Any shares or fractional shares purchased and sold during the current tax year are short-term capital assets. Long-term capital assets: For shares purchased and sold in the year previous to the tax year to be considered long-term, the holding period must be more than one year.
 
Can I use a long-term capital loss carried over from a prior year to offset a short-term capital gain?
 
If your total net loss is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you had incurred it in that next year. If part of the loss is still unused, you can carry it over to later years until it is completely used up. When you carry over a loss, it remains long term or short term. A long term capital loss you carry over to the next tax year will reduce that year's long-term capital gains before it reduces that year's short-term capital gains. When you figure your capital loss carryover, use your short-term capital losses first, even if you incurred them after a long-term capital loss. If you have not reached the limit on the capital loss deduction after using the short-term capital losses, use the long-term capital losses until you reach the limit. If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. However, if you and your spouse once filed a joint return and are now filing separate returns, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss.
 
How many times can I exclude the gain on sale of home?
  With the exception of the 2-year waiting period, there is no limit on the number of times you can exclude the gain on the sale of your home so long as you meet the ownership and use tests
 
What is the amount of capital gains from the sale of a home that can be excluded if sold in less than the two year waiting period?
  If you owned and lived in the property as your main home for less than 2 years, you may still be able to claim an exclusion if you sold home due to a change in health, a change in place of employment or unforeseen circumstances. The maximum amount you can claim will be reduced.
 
Exemption from Sale of Home
 
If you sold your main home in 2006, you may be able to exclude from income any gain up to a limit of $250,000 ( $500,000 on a joint return in most case). If you can exclude all of the gain, you do not need to report the sale on your tax return. But during the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. If you have gain that cannot be excluded, (more than $250,000), it is taxable. Report it on Schedule D. If you have a loss on the sale, you cannot deduct it on your return.