Capital Gains and Basis

Capital gains and basis pages explain how the tax system turns a sale or exchange into a reportable result. Use this section when the real question is not just “what sold,” but how basis, holding period, and special loss rules change what ends up on the return.

Start Here

• Start with Cost Basis if you need the starting number for a gain-or-loss calculation.
• Start with Adjusted Basis if the original cost changed because of improvements, depreciation, or other tax adjustments.
• Start with Capital Gain or Capital Loss if you already know there was a sale and need to classify the result.
• Start with Short-Term Capital Gain or Long-Term Capital Gain if the key question is how long the asset was held.
• Start with Depreciation Recapture if business or rental property was depreciated before the sale and the result may not stay a pure capital gain.
• Start with Section 1231 Property if the sale involves business or rental property held for more than one year and you need the correct character rule.
• Start with Section 1245 Property if the property sold was depreciated equipment, machinery, vehicles, or similar business personal property.
• Start with Section 1250 Property if the sale involves depreciated rental or business real estate.
• Start with Unrecaptured Section 1250 Gain if the question is the special rate bucket after a section 1250 real-property sale.
• Start with Installment Sale if the buyer will make payments after the year of sale.
• Start with Like-Kind Exchange if qualifying business or investment real estate was exchanged rather than sold for cash.
• Start with Wash Sale Rule if a stock loss does not seem to be fully deductible.

Core Pages

• Capital Gain
• Capital Loss
• Cost Basis
• Adjusted Basis
• Depreciation Recapture
• Section 1231 Property
• Section 1245 Property
• Section 1250 Property
• Unrecaptured Section 1250 Gain
• Installment Sale
• Like-Kind Exchange
• Short-Term Capital Gain
• Long-Term Capital Gain
• Wash Sale Rule

What This Section Covers

• The difference between sale proceeds, amount realized, basis, and adjusted basis.
• Why a sale can produce a gain, a loss, or no current deductible loss at all.
• How short-term and long-term classification changes the reporting and rate discussion.
• Where sale activity usually appears in the individual filing workflow, especially on Schedule D and related records.
• Why personal-use property, business property, and securities can follow different tax rules even when each involves a sale.
• Why depreciated business or rental property can produce gain that is not treated as a simple capital gain.

Typical Workflow Questions

• You received a broker statement and need to understand whether the reported number is proceeds, basis, or gain.
• You sold an asset and need to know whether the result belongs in the short-term or long-term bucket.
• You sold depreciated business or rental property and need to understand why part of the gain may flow through Form 4797 instead of staying a pure Schedule D question.
• You sold property on deferred payments and need to understand why Form 6252 may control the yearly reporting.
• You exchanged business or investment real estate and need to know why Form 8824 matters even when gain is deferred.
• You sold something at a loss and need to understand why the full loss may not be deductible right now.
• You are trying to connect basis records to the year-end return instead of relying only on a sale price.

Related Sections

• Business Tax
• Income Tax Basics
• Tax Forms and Filing

In this section

• Adjusted Basis
  Adjusted basis is the updated basis figure used after tax-relevant changes alter the original cost basis of an asset.
• Capital Gain
  A capital gain is the taxable profit that can result when property is sold for more than its tax basis.
• Capital Loss
  A capital loss is the loss that can result when a capital asset is sold or exchanged for less than its tax basis.
• Cost Basis
  Cost basis is the starting tax value used to measure gain or loss when property is later sold or otherwise disposed of.
• Depreciation Recapture
  Depreciation recapture is the rule that can recharacterize part of a gain on depreciable property as ordinary income because of prior depreciation deductions.
• Installment Sale
  An installment sale is a sale where at least one payment is received after the year of sale, often requiring Form 6252 reporting.
• Like-Kind Exchange
  A like-kind exchange is a qualifying exchange of real property held for business or investment that can defer gain recognition under section 1031.
• Long-Term Capital Gain
  A long-term capital gain is a capital gain on property held long enough to fall into the long-term holding-period category.
• Section 1231 Property
  Section 1231 property is certain business or rental property held for more than one year whose sale can produce a special mix of capital-gain and ordinary-loss treatment.
• Section 1245 Property
  Section 1245 property is generally depreciable personal property and certain other business property whose gain can be recaptured as ordinary income when sold.
• Section 1250 Property
  Section 1250 property is generally depreciable real property whose sale can involve section 1250 recapture rules and unrecaptured section 1250 gain treatment.
• Short-Term Capital Gain
  A short-term capital gain is a capital gain on property held for a shorter holding period and is contrasted with long-term capital gain treatment.
• Unrecaptured Section 1250 Gain
  Unrecaptured section 1250 gain is the part of long-term gain from depreciated real property that is subject to a special capital-gain rate calculation.
• Wash Sale Rule
  The wash sale rule is the tax rule that can limit or defer recognition of a loss when substantially similar securities activity occurs too closely around the sale.