A common question about transactions, especially those with high dollar amounts, is whether the gain on that transaction is subject to ordinary tax rates or capital gain tax rates. Basically if the item sold is a “capital asset” then the resulting gain or loss is a capital gain or loss. Everything else is taxed at ordinary tax rates. Although this seems to be a simple delineation, deciding whether the property sold is or was a capital asset can be very difficult. There are specific items excluded from the definition of a capital asset. There are also cases and other IRS rulings that give hints as to what a capital asset is. However, overall many practitioners and even professionals at IRS would agree the definition is unclear in many circumstances. If you would like some guidance as to your transaction, please contact Paul by clicking here.