Treasury Regulations (26 C.F.R.)
26 CFR § 1.1202-1
Deduction for capital gains.
# (a)
In computing gross income, adjusted gross income, taxable income, capital gain net income (net capital gain for taxable years beginning before January 1, 1977) and net capital loss, 100 percent of any gain or loss (computed under section 1001, recognized under section 1002, and taken into account without regard to subchapter P (section 1201 and following), chapter 1 of the Code) upon the sale or exchange of a capital asset shall be taken into account regardless of the period for which the capital asset has been held. Nevertheless, the net short-term capital gain or loss and the net long-term capital gain or loss must be separately computed. In computing the adjusted gross income or the taxable income of a taxpayer other than a corporation, if for any taxable year the net long-term capital gain exceeds the net short-term capital loss, 50 percent of the amount of the excess is allowable as a deduction from gross income under section 1202.
# (b)
For the purpose of computing the deduction allowable under section 1202 in the case of an estate or trust, any long-term or short-term capital gains which, under sections 652 and 662, are includible in the gross income of its income beneficiaries as gains derived from the sale or exchange of capital assets must be excluded in determining whether, for the taxable year of the estate or trust, its net long-term capital gain exceeds its net short-term capital loss. To determine the extent to which such gains are includible in the gross income of a beneficiary, see the regulations under sections 652 and 662. For example, during 1954 a trust realized a gain of $1,000 upon the sale of stock held for 10 months. Under the terms of the trust instrument all of such gain must be distributed during the taxable year to A, the sole income beneficiary. Assuming that under section 652 or 662 A must include all of such gain in his gross income, the trust is not entitled to any deduction with respect to such gain under section 1202. Assuming A had no other capital gains or losses for 1954, he would be entitled to a deduction of $500 under section 1202. For purposes of this section, an income beneficiary shall be any beneficiary to whom an amount is required to be distributed, or is paid or credited, which is includible in his gross income.
# (c)
The provisions of this section may be illustrated by the following example:
Example:
A, an individual, had the following transactions in 1954:
| Long-term capital gain | $6,000 | |
| Long-term capital loss | 4,000 | |
| Net long-term capital gain | $2,000 | |
| Short-term capital loss | 1,800 | |
| Short-term capital gain | 300 | |
| Net short-term capital loss | 1,500 | |
| Excess of net long-term capital gain over net short-term capital loss | 500 | |
Since the net long-term capital gain exceeds the net short-term capital loss by $500, 50 percent of the excess, or $250, is allowable as a deduction under section 1202.
[T.D. 6500, 25 FR 12001, Nov. 26, 1960, as amended by T.D. 7728, 45 FR 72650, Nov. 3, 1980]
Source: view the official text
In this part (40 sections)
- 1.1082-4 · Basis of property acquired by corporation under section…
- 1.1082-5 · Basis of property acquired by shareholder upon tax-free…
- 1.1082-6 · Basis of property acquired under section 1081(d) in…
- 1.1083-1 · Definitions.
- 1.1091-1 · Losses from wash sales of stock or securities.
- 1.1091-2 · Basis of stock or securities acquired in “wash sales”.
- 1.1092(b)-1T · (b)-1T Coordination of loss deferral rules and wash sale…
- 1.1092(b)-2T · (b)-2T Treatment of holding periods and losses with…
- 1.1092(b)-3T · (b)-3T Mixed straddles; straddle-by-straddle…
- 1.1092(b)-4T · (b)-4T Mixed straddles; mixed straddle account…
- 1.1092(b)-5T · (b)-5T Definitions (temporary).
- 1.1092(b)-6 · (b)-6 Mixed straddles; accrued gain and loss associated…
- 1.1092(c)-1 · (c)-1 Qualified covered calls.
- 1.1092(c)-2 · (c)-2 Equity options with flexible terms.
- 1.1092(c)-3 · (c)-3 Qualifying over-the-counter options.
- 1.1092(c)-4 · (c)-4 Definitions.
- 1.1092(d)-1 · (d)-1 Definitions and special rules.
- 1.1092(d)-2 · (d)-2 Personal property.
- 1.1201-1 · Alternative tax.
- 1.1202-0 · Table of contents.
- 1.1202-1 · Deduction for capital gains.
- 1.1202-2 · Qualified small business stock; effect of redemptions.
- 1.1211-1 · Limitation on capital losses.
- 1.1212-1 · Capital loss carryovers and carrybacks.
- 1.1221-1 · Meaning of terms.
- 1.1221-2 · Hedging transactions.
- 1.1221-3 · Time and manner for electing capital asset treatment for…
- 1.1222-1 · Other terms relating to capital gains and losses.
- 1.1223-1 · Determination of period for which capital assets are held.
- 1.1223-3 · Rules relating to the holding periods of partnership…
- 1.1231-1 · Gains and losses from the sale or exchange of certain…
- 1.1231-2 · Livestock held for draft, breeding, dairy, or sporting…
- 1.1232-1 · Bonds and other evidences of indebtedness; scope of section.
- 1.1232-2 · [Reserved]
- 1.1232-3 · Gain upon sale or exchange of obligations issued at a…
- 1.1232-3A · Inclusion as interest of original issue discount on certain…
- 1.1233-1 · Gains and losses from short sales.
- 1.1233-2 · Hedging transactions.
- 1.1234-1 · Options to buy or sell.
- 1.1234-2 · Special rule for grantors of straddles applicable to certain…