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APPENDIX B -- PROPOSED SCHEDULES
AND EXAMPLES Schedule C Statement of Gains, Where There Are No Losses, from Sale (or Exchange) of Assets (In cases where there are losses and no gains from sale (or Exchange) of assets, this form may be used by treating losses as gains after inserting a minus sign before each loss) 1. DESCRIPTION OF 2. DATE ACQUIRED 3. DATE SOLD PROPERTY AND OR EXCHANGED PERIOD HELD 4. GROSS SALES PRICE 5. COST OR MARCH 1, (Contract price) 1913, VALUE IF ACQUIRED BEFORE THAT DATE. (Indicate basis) /**/ 6. COST OF IMPROVEMENTS 7. DEPRECIATION SUBSEQUENT TO ALLOWED ACQUISITION OR (OR ALLOWABLE) MARCH 1, 1913 SINCE ACQUISITION OR MARCH 1, 1913 (Furnish details) 8. Gain 9. No. of years 10. Weighted gains held /*/ (Col. 8 X Col. 9) Partnerships & fiduciaries 1. Total XXXXXX 2. Average investment period for gains /*/ (Line 1, Col. 10 divided by Col. 8) 3. Average annual gain (Line 1, Col. 8 divided by line 2) 4. Surtax net income (From item 24 page 1 of return; if none, enter a zero) 5. Surtax net income plus net average annual gain (Line 3 plus line 4) 6. Tentative tax on line 5 (Use rate schedule below) 7. Tentative tax on line 4 (Use rate schedule below) 8. Tax on average annual gain (Line 6 minus line 7) 9. Total tax on capital gains (Line 8 multiplied by line 2) FOOTNOTE TO TABLE /*/ Disregard fractional parts of a year unless they amount to one-half or more, in which case, count them as a full year. END OF FOOTNOTE Schedule C - Part 1 Statement of Gains and Losses from Sale (or Exchange) of Assets 1. DESCRIPTION OF 2. DATE ACQUIRED 3. DATE SOLD PROPERTY AND OR EXCHANGED PERIOD HELD 4. GROSS SALES PRICE 5. COST OR MARCH 1, (Contract price) 1913, VALUE IF ACQUIRED BEFORE THAT DATE. (Indicate basis) /**/ 6. COST OF IMPROVEMENTS 7. DEPRECIATION SUBSEQUENT TO ALLOWED ACQUISITION OR (OR ALLOWABLE) MARCH 1, 1913 SINCE ACQUISITION OR MARCH 1, 1913 (Furnish details) 8. Gain 9. Loss 10. No. of years held /*/ 11. Weighted gains 12. Weighted losses (Col. 8 X Col. 10) (Col. 9 X Col. 10) Partnerships & fiduciaries 1. Total XXXXXX 2. Average Investment period for gains /*/ (Line 1, Col. 11 divided by Col. 8) 3. Average investment period for losses /*/ (Line 1, Col. 12 divided by Col. 9) 4. Average annual gain (Line 1, Col. 8 divided by line 2) 5. Average annual loss (Line 1, Col. 9 divided by line 3) 6. Net average annual gain or loss (Line 4 minus line 5; if line 5 exceeds line 4, indicate net average annual loss by using minus sign) 7. Average annual gain or loss for longer investment period (Enter line 4 if line 2 is greater than line 3; otherwise enter line 5, preceded by a minus sign) FOOTNOTE TO TABLE /*/ Disregard fractional parts of a year unless they amount to one-half or more, in which case, count them as a full year END OF FOOTNOTE Schedule C -- Part 2 /*/ Computation of Tax or Tax Credit on Capital Gains and Losses 8. Surtax net income (From item 24 page 1 of return; if none, enter a zero) 9. Surtax net income adjusted for net average annual gain or loss (Line 6 plus line 8) 10. Tentative tax on line 9 (Use rate schedule below) 11. Surtax net income adjusted for average annual gain or loss for longer average investment period (Line 7 plus line 8) 12. Tentative tax on line 11 (Use rate schedule below) 13. Tentative tax on line 8 (Use rate schedule below) 14. Annual tax or tax credit with respect to shorter average investment period (Line 10 minus line 12) 15. Total tax or tax credit with respect to shorter average investment period (Line 14 multiplied by line 2 or line 3, whichever is smaller) 16. Annual tax or tax credit with respect to longer average investment period (Line 12 minus line 13) 17. Total tax or tax credit with respect to longer average investment period (Line 16 multiplied by line 2 or line 3, whichever is greater) 18. Aggregate tax or tax credit on capital gains and losses (Line 15 plus line 17) FOOTNOTE TO TABLE /*/ For a discussion of the tax computation procedure followed in this schedule, see page 69. END OF FOOTNOTE Combined normal tax and surtax rates /*/ Amount of Rate Total normal surtax net income (percent) tax and surtax 0 -- 4,000 4 $160 14,000 -- 6,000 8 320 6,000 -- 8,000 9 500 8,000 -- 10,000 10 700 10,000 -- 12,000 11 920 12,000 -- 14,000 12 1,160 14,000 -- 16,000 13 1,420 16,000 -- 18,000 15 1,720 18,000 -- 20,000 17 2,060 20,000 -- 22,000 19 2,440 22,000 -- 26,000 21 3,280 26,000 -- 32,000 23 4,660 32,000 -- 38,000 25 6,160 38,000 -- 44,000 28 7,840 44,000 -- 50,000 31 9,700 50,000 -- 56,000 35 11,800 56,000 -- 62,000 39 14,140 62,000 -- 68,000 43 16,720 68,000 -- 74,000 47 19,540 74,000 -- 80,000 51 22,600 80,000 -- 90,000 55 28,100 90,000 -- 100,000 59 34,000 100,000 -- 150,000 62 65,000 150,000 -- 200,000 64 97,000 200,000 -- 250,000 66 130,000 250,000 -- 300,000 68 164,000 300,000 -- 400,000 70 234,000 400,000 -- 500,000 72 306,000 500,000 -- 750,000 74 491,000 750,000 -- 1,000,000 76 681,000 1,000,000 -- 2,000,000 77 1,451,000 2,000,000 -- 5,000,000 78 3,791,000 5,000,000 and over 79 FOOTNOTE TO TABLE Note: Where the amount to be subjected to tax is preceded by a minus sign, compute the tax disregarding the minus sign, then insert a minus sign before the resulting tax to indicate a tax credit. /*/ In order to simplify as much as possible the actual tax computation for the taxpayer, it is advisable to print in the capital gains schedule a table showing the combined normal and surtax rates. It is possible to combine the two rates because the recommended treatment disallows, in computing the tax or tax credit on capital gains and losses, any portions of the personal exemption and credit for dependents, and the minimum earned income credit, which are not utilized in computing the tax on ordinary income. END OF FOOTNOTE Note On Tax Computation Procedure Used In Part 2 Of Proposed Schedule The tax computation procedure described in the recommended plan may be shown symbolically as follows: Let T = total tax on capital gains. Let S = number of years in shorter average investment period. Let L = number of years in longer average investment period. Let O = total tax on surtax net income. Let A = total tax on sum of surtax net income, average annual gain, and average annual loss. Let B = total tax on sum of surtax net income and average annual gain or average annual loss, whichever accrued for the longer average investment period. Then, T= S(A -- O) + (L -- S)(B -- O) or, T = SA -- OS + LB -- SB + OS -- OL from which, T = SA + LB -- SB -- OL or, T = S(A -- B) + L(B -- O) This latter tax procedure has been adopted in the proposed schedule (Schedule C, Part 2; see page 67) because it produces identical results with the tax procedure under the recommended plan while substituting simpler computations. Illustrative Examples For purposes of illustrating the operation of the recommended plan for the tax treatment of the capital gains and losses of individuals, twelve cases, with varying assumptions respecting surtax net income and capital gains and losses, have been chosen. These cases, which follow immediately, are reported in the same form as the proposed schedules for capital gains. The assumptions for each case appear in the respective schedules. It will be noted that Cases I and II have capital gains and no capital losses; Cases III and IV, capital losses and no capital gains; and Cases V through X both capital gains and capital losses. Cases I, III, V, and VIII have no surtax net income, while the remaining cases have surtax net incomes of varying amounts. Cases I and II Schedule C Statement of Gains, Where There Are No Losses, From Sale (or Exchange) of Assets (In cases where there are losses and no gains from sale (or exchange) of assets, this form may be used by treating losses as gains after inserting a minus sign before each loss) g. Gain 9. 10. No. of Weighted years gains (Col. held /*/ 8 x Col. 9) - 2,000 1 - 2,000 - 3,000 2 - 6,000 - 4,000 3 - 12,000 - 5,000 4 - 20,000 - 1,000 5 - 5,000 - 5,000 6 - 30,000 - 70,000 7 - 490,000 - 10,000 8 - 80,000 - 5,000 9 - 45,000 - 5,000 10 - 50,000 1. Total 110,000 XXXXXX 740,000 Case I Case II 2. Average investment period for 7 7 gains /*/ (Line 1, Col. 10 divided by Col. 8) 3. Average annual gain (Line 1, 15,714 15,714 Col. 8 divided byline 2) 4. Surtax net income (From item 24 0 10,000 page 1 of return; if none, enter a zero) 5. Surtax net income plus net 15,714 5,714 average annual gain (Line 3 plus line 4) 6. Tentative tax on line 5 1,383 3,220 (Use rate schedule below) 7. Tentative tax on line 4 0 700 (Use rate schedule below) 8. Tax on average annual gain 1,383 2,520 (Line 6 minus line 7) 9. Total tax on capital gains 9,681 17,640 (Line 8 multiplied by line 2) FOOTNOTE TO TABLE /*/ Disregard fractional parts of a year unless they amount to one-half or more, in which case, count them as a full year. END OF FOOTNOTE Cases III and IV Schedule C Statement of Gains, Where There Are No Losses, from Sale (or Exchange) of Assets (In cases where there are losses and no gains from sale (or exchange) of assets, this form may be used by treating losses as gains sifter inserting a minus sign before each loss) g. Gain 9. 10. No. of Weighted years gains (Col. held /*/ 8 x Col. 9) - 2,000 1 - 2,000 - 3,000 2 - 6,000 - 4,000 3 - 12,000 - 5,000 4 - 20,000 - 1,000 5 - 5,000 - 5,000 6 - 30,000 - 7,000 7 - 490,000 - 10,000 8 - 80,000 - 5,000 9 - 45,000 - 5,000 10 - 50,000 1. Total -110,000 XXXXXX - 740,000 Case III Case IV 2. Average investment period 7 7 for gains /*/ (Line 1, Col. 10 dividend by Col. 8) 3. Average annual gain (Line 1, - 15,714 - 15,714 Col. 8 divided by line 2) 4. Surtax net income (From 0 10,000 item 24 page 1 of return; if none, enter a zero) 5. Surtax net income plus - 15,714 - 5,714 net average annual gain (Line 3 plus line 4) 6. Tentative tax on line 5 - 1,383 - 297 (Use rate schedule below) 7. Tentative tax on line 4 0 700 (Use rate schedule below) 8. Tax on average annual gain - 1,383 - 997 (Line 6 minus line 7) 9. Total tax on capital gains - 9,681 - 6,979 (Line 8 multiplied by line 2) FOOTNOTE TO TABLE /*/ Disregard fractional parts of a year unless they amount to one-half or more, in which case, count them as a full year. END OF FOOTNOTE Cases V, VI and VII Schedule C -- Part 1 Statement of Gains and Losses from Sale (or Exchange) of Assets g Gain 9. 10. 11. 12. Loss No. of Weighted Weighted years gains losses held /*/ (Col. 8g X (Col. 9 x Col. 10) Col. 10) 2,000 1 2,000 3,000 2 6,000 4,000 3 12,000 5,000 4 20,000 1,000 5 5,000 5,000 6 30,000 70,000 7 490,000 10,000 8 80,000 5,000 9 45,000 5,000 10 50,000 1. Total 30,000 80,000 XXXXXX 155,000 585,000 2. Average investment period for gains /*/ 5 (Line 1, Col. 11 divided by Col. 8) 3. Average investment period for losses /*/ 7 (Line 1, Col. 12 divided by Col. 9) 4. Average annual gain (Line 1, Col. 8 6,000 divided by line 2) 5. Average annual loss (Line 1, Col. 9 11,429 divided by line 3) 6. Net average annual gain or loss - 5,429 (Line 4 minus line 5; if line 5 exceeds line 4, indicate net average annual loss by using minus sign) 7. Average annual gain or loss for longer - 11,429 investment period (Enter line 4 if line 2 is greater than line 3; otherwise enter line 5, preceded by a minus sign) FOOTNOTE TO TABLE /*/ Disregard fractional parts of a year unless they amount to one-half or more, in which case, count them as a full year. END OF FOOTNOTE Cases V, VI, and VII Schedule C -- Part 2 Computation of Tax or Tax Credit on Capital Gains and Losses Case V Case VI Case VII 8. Surtax net income (From 0 10,000 100,000 item 24, page 1 of return; if none, enter a zero) 9. Surtax net income - 5,429 4,571 94,571 adjusted for net average annual gain or loss (Line 6 plus line 8) 10. Tentative tax on - 274 206 30,797 line 9 (Use rate schedule below) 11. Surtax net income - 11,429 - 1,429 88,571 adjusted for average annual gain or loss for longer average investment period (Line 7 plus line 8) 12. Tentative tax on line - 857 - 57 27,314 11 (Use rate schedule below) 13. Tentative tax on line 0 700 34,000 8 (Use rate schedule below) 14. Annual tax or tax 583 263 3,483 credit with respect to shorter average investment period (Line 10 minus line 12) 15. Total tax or tax credit 2,915 1,315 17,415 with respect to shorter average investment period (Line 14 multiplied by line 2 or line 3, whichever is smaller) 16. Annual tax or tax - 857 - 757 - 6,686 credit with respect to longer average investment period (Line 12 minus line 13) 17. Total tax or tax credit - 5,999 - 5,299 - 46,802 with respect to longer average investment period (Line 16 multiplied by line 2 or line 3, whichever is greater) 18. Aggregate tax or tax - 3,084 - 3,984 - 29,387 credit on capital gains and losses (Line 15 plus line 17) Cases VII, IX and X Schedule C - Part 1 Statement of Gains and Losses from Sale (or Exchange) of Assets g. Gain 9. 10. 11. 12. Loss No. of Weighted Weighted years gains losses held /*/ (Col. 8 X (Col. 9 X Col. 10) Col. 10) 2,000 1 2,000 3,000 2 6,000 4,000 3 12,000 5,000 4 20,000 1,000 5 5,000 5,000 6 30,000 70,000 7 490,000 10,000 8 80,000 5,000 9 45,000 5,000 10 50,000 1. Total 100,000 10,000 XXXXXX 645,000 95,000 2. Average investment period for gains /*/ 6 (Line 1, Col. 11 divided by Col. 8) 3. Average investment period for losses /*/ 10 (Line 1, Col. 12 divided by Col. 9) 4. Average annual gain (Line 1, Col. 8 divided 16,667 by line 2) 5. Average annual loss (Line 1, Col. 9 divided 1,000 by line 3) 6. Net average annual gain or loss (Line 4 15,667 minus line 5; if line 5 exceeds line 4, indicate net average annual loss by using minus sign) 7. Average annual gain or loss for longer - 1,000 investment period (Enter line 4 if line 2 is greater than line 3; otherwise enter line 5, preceded by a minus sign) FOOTNOTE TO TABLE /*/ Disregard fractional parts of a year unless they amount to one-half or more, in which case, count them as a full year. END OF FOOTNOTE Cases VIII, IX and X Schedule C -- Part 2 Computation of Tax or Tax Credit on Capital Gains and Losses Case VIII Case IX Case X 8. Surtax net income 0 10,000 100,000 (From item 24, page 1 of return; if none, enter a zero) 9. Surtax net income 15,667 25,667 115,667 adjusted for net average annual gain or loss (Line 6 plus line 8) 10. Tentative tax on 1,377 3,210 43,714 line 9 (Use rate schedule below) 11. Surtax net income -1,000 9,000 99,000 adjusted for average annual gain or loss for longer average investment period (Line 7 plus line 8) 12. Tentative tax on line -40 600 33,410 11 (Use rate schedule below) 13. Tentative tax on line 0 700 34,000 8 (Use rate schedule below) 14. Annual tax or tax 1,417 2,610 10,304 credit with respect to shorter average investment period (Line 10 minus line 12) 15. Total tax or tax credit 8,502 15,660 61,824 with respect to shorter average investment period (Line 14 multiplied by line 2 or line 3, whichever is smaller) 16. Annual tax or tax credit -40 -100 -590 with respect to longer average investment period (Line 12 minus line 13) 17. Total tax or tax credit -400 -1,000 -5,900 with respect to longer average investment period (Line 16 multiplied by line 2 or line 3, whichever is greater) 18. Aggregate tax or tax 8,102 14,660 55,924 credit on capital gains and losses (Line 15 plus line 17) |

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