§1222 — Other terms relating to capital gains and losses

The release gave the owner of the encumbered land the right to "Respondent also relies on other cases, each of which is factually distinguishable from this case. For example, respondent cites Wolff v. Commissioner, 148 F.3d 186, 188-189 (2d Cir. 1998), revg. Estate of Israel v. Commissioner, 108 T.C. 208 (1997), where the court held that there was no sale or exchange under sec. 1222 on the cancellation of forward contracts because on cancellation, the contract (the underlying asset) ceased to ex

We hold that the Fraziers’ long-term capital gain does not include the $5.62 loss disallowed.

As the exchanges resulted in the termination of those obligations, we hold that section 1234A(1) applies to the exchanges.

Respondent contends that losses on sales ofPFIC stocks are properly treated as either long-term or short-term capital losses depending on the holding period of the asset pursuant to section 1222.

We must decide whether a qui tam award qualifies for capital gains treatment under section 1222.2 We hold that a qui tam award does not satisfy the capital gains requirements.

Because respondent did not raise the duty of consistency as an affirmative defense in the amended answer and has not met the burden of establishing that the duty of consistency applies in this case, we hold thats Mr.

Pursuant to section 1222, a "sale or exchange" of a capital asset is a prerequisite to capital gain treatment .

It has been held that, consistent with this statutory mandate, the Form 1040, Individual Income Tax Return, and its schedules “ensure that capital gain distributions are taxed.” Torre v.

However, pursuant to section 1222(3), the term “long-term capital gain” means gain from the sale of a capital asset held for more than 1 year if, and to the extent, such gain is taken into account in computing gross income.

The legislative history concerning section 1234A states the following: Present Law The definition of capital gains and losses in section 1222 requires that there be a "sale or exchange" of a capital asset.

Gain from the sale of a capital asset held longer than 1 year is long-term capital gain under section 1222(3), and net gain from the sale of property used in a taxpayer's trade or business is treated as long-term capital gain under section 1231(a)(1).

n prior years. Respondent's position is that petitioners' straddles, which had a holding period of more than 6 months but less than 1 year (less than 9 months for tax year 1977), do not qualify for long- (cid:16)04ter2m capital gains treatment under section 1222. Respondent determined that these transactions do not fulfill the requirements of section 1222, because (1) they were not "futures transactions", and (2) they were not conducted "subject to the rules of a board of trade or commodity exch

OPINION KROUPA, Judge: Respondent determined deficiencies of $716,883 and $94,714 in petitioners’ Federal income tax for 2008 and 2009, respectively (years at issue). We must decide whether a qui tam award qualifies for capital gains treatment under section 1222. We hold that a qui tam award does not satisfy the capital gains requirements. Background The parties submitted this case fully stipulated pursuant to Rule 122, and the facts are so found. The stipulation of facts and its accompanying ex

Pursuant to section 1222, a "sale or exchange" of a capital asset is a prerequisite to capital gain treatment .

Pursuant to section 1222, a "sale or exchange" of a capital asset is a prerequisite to capital gain treatment .

Pursuant to section 1222, a "sale or exchange" of a capital asset is a prerequisite to capital gain treatment .

As to distributions of capital gain dividends (defined in section 852(b)(3)(C)), by regulated investment companies or mutual funds, section 852(b)(3)(B) states: “A capital gain dividend shall be treated by the shareholders as a gain from the sale or exchange of a capital asset held for more than 1 year.” Section 1222(3) states that the term “long-term capital gain” means “gain from the sale or exchange of a capital asset held for more than 1 year”.

l asset and - 2 - that the settlement of the lawsuit constituted a sale or exchange for purposes of the capital gain provisions. Held: The settlement of the lawsuit between the S corporations and X did not constitute a sale or exchange pursuant to sec. 1222, I.R.C., and thus the settlement proceeds received by the S corporations and passed through to P constitute ordinary income. Robert A. Schnur and Joseph A. Pickart, for petitioners. George W. Bezold and Christa A. Gruber, for respondent. JACO

The legislative history concerning section 1234A states the following: Present Law The definition of capital gains and losses in section 1222 requires that there be a "sale or exchange" of a capital asset.

CRI-Leslie, LLC v. Commissioner, 882 F.3d at 1029 (emphasis added). Other courts, including this Court, have used similar wording. See, e.g., Pilgrim’s Pride Corp. v. Commissioner, 779 F.3d at 315 (“By its plain terms, § 1234A(1) applies to the termination of rights or obligations with respect to capital assets (e.g. derivative or contra

Section 1222(3) defines long-term capital gain as “gain from the sale or exchange of a capital asset held for more than 1 year.” And section 1012(a) provides that the basis of property is the cost of such property, with exceptions not applicable here.

We thus find that petitioner is taxable for 2014 on long-term capital gain of $263,701.2 C. “Other Income” 1. Cancellation of Indebtedness The IRS determined in the notice of deficiency that petitioner for 2013 received $73,906 of cancellation-of-indebtedness (COI) income. Gross income generally includes income from the discharge of

iling of gift tax returns, petitioners contributed the crops to the CRATs. There is no evidence that the CRATs, which had no assets be- fore the crops were transferred to them, paid any consideration that could give rise to a “sale or exchange.” See § 1222. And if petitioners had sold the crops to the CRATs, they would have had to report addi- tional farming income on their Schedules F for 2015 and 2016, which they did not do. Equally unpersuasive is petitioners’ reliance on the Forms 4797 attac

e in those Forms 1040X are not relevant here. - 7 - [*7] II. Capital Loss Capital loss is the excess ofthe taxpayer's adjusted basis in a capital asset over the amount realized in the sale or disposition ofthat capital asset. Sec. 1001(a); see also sec. 1222. Therefore, the amount ofpetitioners' deductible capital loss depends on the amount they realized on the foreclosure sale ofthe Dauphin Island properties and their aggregate adjusted basis in those properties. A. Amount Realized The amount r

Thus, they reported the gain from CSG's sale of Unit B as long-term capital gain not by reason ofsection 1222(3), which defines "(...continued) under sec.

e in those Forms 1040X are not relevant here. - 7 - [*7] II. Capital Loss Capital loss is the excess ofthe taxpayer's adjusted basis in a capital asset over the amount realized in the sale or disposition ofthat capital asset. Sec. 1001(a); see also sec. 1222. Therefore, the amount ofpetitioners' deductible capital loss depends on the amount they realized on the foreclosure sale ofthe Dauphin Island properties and their aggregate adjusted basis in those properties. A. Amount Realized The amount r

- 8 - [*8] Per Per P Per Per P reply Form 4797 Per exam opening brief R brief brief Cost $2,042,440 $1,680,688 $1,800,960 $1,445,000 $1,800,960 Depr. 140,054 346,580 140,054 --- 148,205 Adj. basis 1,902,386 1,334,108 1,660,906 --- 1,652,7554 Andersen's final computation ofhis adjusted basis had four parts: $1,680,688 (original cost,

1)(A) reduces the allowable deduction by "the amount ofgain which would not have been long-tenu capital gain * * * ifthe property contributed had been sold by the taxpayer at its fair market value (deter- mined at the time ofsuch contribution)." See sec. 1222(1), (3). Since petitioner donated all or most ofthe items shortly after purchasing them, she would have realized short-term capital gain ifshe had sold them instead.

Section 1222(3) provides that the tenn "long-term capital gain" means "gain from the sale or exchange ofa capital asset held for more than 1 year." Net long-term capital gains are subject to tax at the - 12 - [*12] preferential rates set forth in section 1(h).

- 28 - entitled to any deduction under section 170 for its contribution ofthe SMI to the University. See sec. 170(a)(1); sec. 1.170A-13(c)(1), Income Tax Regs.¹² III. Penalties As noted at the outset, the FPAA determined that the charitable contribution deduction that RERI claimed for its assignment ofthe SMI to the University result

5 - [*55] A. Petitioner's Failure To Establish an Ownership Interest Petitioner asserts that he had a partnership interest in New Amsterdam, and that consequently upon the collapse ofthat partnership in bankruptcy, he sustained a capital loss under section 1222. Petitioner presented no evidence to substantiate his asserted partnership interest. No copy ofthe partnership agreement was entered into evidence. New Amsterdam's bankruptcy filings were introduced into evidence, but petitioner was not l

- 5 - [*5] (D) the capital gain net income (as defined in section 1222) ofthe taxpayer for such taxable year * * * Section 32(j) provides for an inflation adjustment.

tion 61(a)(2) as income derived from a business. In the alternative, respondent determined that the credits were propertytaxable under section 61(a)(3) as gains derived from dealings in property as ordinary income or as short-term capital gain under section 1222. In the amended answer, however, respondent stated: "[I]n support ofrespondent's determination that petitioner received taxable proceeds in 2005 from the sale ofVirginia state land preservation credits, respondent alleges that the 'capit

6 For a transactionto receive capital gains treatment, the property which is transferred must be sold or exchanged. Nahey v. Commissioner, 111 T.C. 256, 262 (1998), aff'd, 196 F.3d 866 (7th Cir. 1999). It is frequentlynecessaryto determine whether a variety ofconditions included in an agreement between the transferor and the transferee

one year (in which case the deduction is the property's fair market value) or for a lesser period (in which case the deduction is the taxpayer's basis in the property). See sec. 170(a), (e)(1)(A); sec. 1.170A-1(a), (c)(1), Income Tax Regs.; see also sec. 1222(3) (providingthat property may qualify for long-term capital gain treatment only ifheld for over one year). - 4 - [*4] HMPA 1995-2, HMPA 1995-3, and HMPA 1995-4 each operated for one year (1996, 1997, and 1998, respectively). During or for

1222(11) defines the phrase "1et capital gains" as the excess ofnet long-term capital gain over the net short- erm capital loss for the taxable year. Thus, a taxpayer's net capital gains depe ds on the interplay between the taxpayer's long-term capital gains and lo ses (which make up net long-term capital gains) as well as the taxpayer's short

Therefore, petitioner's substantial long-term capital losses are from stocks that he held for more than one year. Holding periods ofone year "belie any effort to capitalize on daily or short-term swings in the market." Mayer v. Commissioner, 1994 Tax Ct. Memo LEXIS 216, at *18. We 16We excluded the long-term capital loss carryover fro

Section 1222(3) provides that long-term capital gain is "gain from the sale or exchange ofa capital asset held for more than 1 year, ifand to the extent such - 41 - [*41] gain is taken into account in computing gross income." While the record d the 32188 Bartel Street property, the does not show when petitioner ac¿luire d the

Section 61(a) (7) provides that dividends are includable in gross income .

Section 1222(3) defines long-term capital gain as "gain from the sale or exchange of a capital asset held for more than 1 year". It follows that when a taxpayer donates appreciated art that he held for 1 year or less, the amount of the deduction must be determined with regard to section 170(e) (1) (A); i.e., the deduction is limited to the taxpayer

Section 1221 defines “capital asset” as property held by a taxpayer, except for eight categories of property specifically excluded from the definition. None of the excluded categories is applicable to the State tax credits at issue. The purpose of capital gains treatment is to provide some relief to taxpayers from the excessive burdens o

Secondary Issue Concerning Interest Deductions The secondary issue for decision involves petitioners’ claim to interest deductions. Our decision as to this issue also does not turn on any disputed fact. Thus, this issue is also ripe for summary judgment. Respondent disallowed petitioners’ deductions for interest paid to Refco in 2001

Respondent is correct that there is - 19 - nothing in the record showing that petitioner held any of those assets for more than 1 year. As with petitioner’s bases in his interests in Oxford and Kemper, we think it appropriate that petitioner bear the burden of producing evidence showing a holding period greater than 1 year. Petitione

1997 Nonemployee Compensation Respondent determined that petitioner received $10,800 in nonemployee compensation from Florida EMS in 1997. The parties stipulated that petitioner received nonemployee compensation in 1997 from Florida EMS of “at least” $5,400. Petitioner asserts that Florida EMS mistakenly sent a duplicate Form 1099

A capital asset is property held by a taxpayer of a type other than the eight categories of property 2There were no capital gains or capital losses reflected on the faces of the returns filed by petitioners in each of the years in issue. For the 1997 return, there was a Schedule D, Capital Gains and Losses, attached to the return which s

The term “capital asset” means “property held by the taxpayer (whether or not connected with his trade or business)”, but does not include “property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business”. Sec. 1221(1). 50At the time of the sale, petitioner was the beneficiary of a 90.689-

orward to the current taxable year under section 1212(b)(1)(A) is treated as a short- term capital loss for such taxable year.11 Sec. 1.1222-1(b)(1), Income Tax Regs. Likewise, for purposes of determining “net 10 See, e.g., similar definitions under sec. 1222(9) that define “capital gain net income” as “the excess of the gains from the sales or exchanges of capital assets over the losses from such sales or exchanges”, and under sec. 1.469- 2T(e)(3)(ii)(E)(3), Temporary Income Tax Regs., 53 Fed.

3 During the hearing, Peter acknowledged that some portion of the $64,000 additional payment constituted a penalty for prepayment of the loans. In his brief, respondent characterizes the entire $64,000 as accrued interest. The distinction is of no consequence because loan prepayment penalties are generally treated as interest for Fede

s a majority voting interest. ARB 51, par. 2. Petitioners first treated Burndy- Japan as a CFC for income tax purposes in 1987, following enactment of a tax law change relating to foreign tax credits which made it advantageous to do so. See TRA 1986 sec. 1222(a)(1), 100 Stat. 2556. Burndy-US’s ownership interest in Burndy-Japan did not change between 1973 and 1993. However, in deciding whether Burndy-US controlled Burndy-Japan in 1992, we do 16 Petitioners’ argument strains credulity because Bur

A “capital asset” means property held by the taxpayer (whether or not connected with his trade or business) that is not covered by one of five specifically enumerated exclusions. Sec. 1221. In Schelble v. Commissioner, T.C. Memo. 1996-269, affd. 130 F.3d 1388 (10th Cir. 1997), we considered whether the taxpayer received gain from the

s a majority voting interest. ARB 51, par. 2. Petitioners first treated Burndy- Japan as a CFC for income tax purposes in 1987, following enactment of a tax law change relating to foreign tax credits which made it advantageous to do so. See TRA 1986 sec. 1222(a)(1), 100 Stat. 2556. Burndy-US’s ownership interest in Burndy-Japan did not change between 1973 and 1993. However, in deciding whether Burndy-US controlled Burndy-Japan in 1992, we do 16 Petitioners’ argument strains credulity because Bur

A “capital asset” means property held by the taxpayer (whether or not connected with his trade or business) that is not covered by one of five specifically enumerated exclusions. Sec. 1221. In Schelble v. Commissioner, T.C. Memo. 1996-269, affd. 130 F.3d 1388 (10th Cir. 1997), we considered whether the taxpayer received gain from the

s trade or business, of a character * * * subject to * * * depreciation * * *; (3) a copyright * * *; (4) accounts or notes receivable acquired in the ordinary course of * * * business * * *; (5) a publication of the United States Government * * *; Section 1222(3) provides: "The term 'long-term capital gain' means gain from the sale or exchange of a capital asset." (Emphasis added.) There was no sale or exchange of any property by petitioner during 1996.

Section 1221(3) provides that the term "capital asset" does not include "a copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar - 64 - property, held by --(A) a taxpayer whose personal efforts created such property".

1222; Arkansas Best Corp. v. Commissioner, 485 U.S. 212, 223 (1988). A "capital asset" includes any "property held by the taxpayer (whether or not connected with his trade or business)" that is not within one of five categories. Sec. 1221; Arkansas Best Corp. v. Commissioner, supra at 215. Section 1221(1), the only category that could apply he

1222; Arkansas Best Corp. v. Commissioner, 485 U.S. 212, 223 (1988). A "capital asset" includes any "property held by the taxpayer (whether or not connected with his trade or business)" that is not within one of five categories. Sec. 1221; Arkansas Best Corp. v. Commissioner, supra at 215. Section 1221(1), the only category that could apply he

1222; Estate of Nordquist v. Commissioner, 481 F.2d 1058, 1061 (8th Cir. 1973), affg. T.C. Memo. 1972-198; Ackerman v. United States, 335 F.2d 521, 526—527 (5th Cir. 1964); Breen v. Commissioner, 328 F.2d 58, 64 (8th Cir. 1964), affg. T.C. Memo. 1962-230. The phrase “sale or exchange” is not defined in section 1222, but we apply the ordinary m

owed by section 248, relating to organization expenditures). In order for section 1374 to apply, petitioner must have recognized “net capital gain”, which means the excess of net long-term capital gain over net short-term capital loss, as defined in section 1222. Given that petitioner reported no capital gains or losses on its 1988 income tax return, in order for section 1374 to apply, petitioner’s distribution of sic stock to Arnold must have resulted in a long-term capital gain, exceeding $25,

In these cases, Mr. Lemons purchased the nine club member- ships on or about January 16, 1986, at the time the beach club closed the loan transaction with the permanent lender, Sandia. The parties agree that the club memberships had become worthless by the end of 1986. Petitioners disagree that the losses should be treated as capital

Moreover, the gain from the sale of property is equal to the excess of the amount realized (i.e., the sum of any money received plus the fair market value of the property received; sec. 1001(b)) from the sale, over the taxpayer's adjusted basis in the property. Sec. 1001(a). Respondent contends that as a result of the repurchase by TSI o