Section 13 Individual Stockholders

• Library: Bus Trans 2005

If the sale of stock results in a short-term capital gain, the gain will be offset by:

• short-term capital losses; and
• net long-term capital losses of the taxpayer as defined in I.R.C. § 1222

Any amount of short-term capital gain that is not offset will be taxed as ordinary income. Similarly, a net short-term capital loss will offset net long-term capital gains and then ordinary income on a dollar-for-dollar basis up to a maximum of $3,000 in each tax year. I.R.C. § 1211(b).

Long-term capital gains realized by individual taxpayers receive much more favorable treatment under the I.R.C. Long-term capital gains will be offset by the taxpayer’s long-term capital losses and net short-term capital losses.

Under I.R.C. § 1202(a), a taxpayer, other than a corporation, who sells “qualified small business stock” after...