Sales of capital assets reported on individual income tax returns, 1999 - Illustration

Statistics of Income Bulletin, Summer, 2003 by Janette Wilson

Net capital gains (i.e., net of capital losses) increased by more than 22 percent for Tax Year 1999, increasing by over $98 billion to $530.7 billion from Tax Year 1998 amounts [1]. Taxpayers reported 182.4 million transactions, an increase of more than 28 percent from the previous year. More than 57 percent of these transactions were corporate stock sales. Increased sales of capital assets during Tax Year 1999 reflected the continued growth of the economy as stock prices as measured by the Standard and Poor 500 Index rose 22.3 percent [2].

The total sales price for all assets increased by over 54 percent for Tax Year 1999, increasing by over $1.26 trillion to approximately $3.6 trillion from the previous years' amount. More than 56 percent of the total sales price was from corporate stock sales. Of the $2.0 trillion corporate stock sales, 76.2 percent were short-term and 23.8 percent long-tem.

Capital gains from sales of corporate stock accounted for 42.4 percent of total net capital gains. The next largest sources of capital gains were pass-through entities with 25.3 percent, and capital gains distributions from mutual funds at almost 11.5 percent of total net capital gains (see Figure A).

Detailed Tables

Tables 1 through 4 present detailed data on sales of capital assets for 1999. Tables 1 and 2 show aggregated data from transactions reported on the following tax forms: Schedule D (Capital Gains and Losses and Reconciliation of Forms 1099B); Form 4797 (Gains and Losses from Sales or Exchanges of Assets Used in a Trade or Business and Involuntary Conversions); Form 6252 (Installment Sales); Form 8824 (Like-Kind Exchanges); Form 4684 (Casualties and Thefts); Form 2439 (Undistributed Long-Term Capital Gains); and Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles). Capital gains and losses reported on other forms and carried to Schedule D were also included. Tables 3 and 4 present data on holding periods and months of sale.

Table 1 shows the distribution of gain and loss transactions by asset type and whether they were treated as short-term or long-term. Capital gain distributions and pass-through gains from partnerships, S corporations, and estates and trusts were counted as one transaction even though the gain or loss may be from more than one entity.

Taxpayers reported 182.4 million transactions for 1999, an increase of 28.3 percent from 142.2 million for Tax Year 1998. Sales of corporate stock were the largest category of both short-term and long-term transactions whether measured by the number of transactions, sales price, or amount of net gain or loss. Of the more than 105 million corporate stock transactions, 72.7 million were short-term, and 32.8 million were long-term. This represented a 19.3-percent increase in the number of long-term stock transactions and a 52.6-percent increase in the number of short-term transactions. Thus, the percentage of all stock transactions that were short-term increased from approximately 63 percent for Tax Year 1998 to 68.9 percent in 1999. This increase in short-term stock trading reflected rising stock prices and increased activity by 'day traders.' This is illustrated by the increase in the average number of short-term stock transactions from 8.56 in Tax Year 1998 to 10.2 for 1999.

The second largest category in terms of number of transactions was sales of mutual funds followed by capital gain distributions from mutual funds. The number of transactions was 26.9 million (increasing 24.3 percent from 21.6 million during the previous year) and 17.1 million respectively (just 6.0 percent more than for 1998).

Total sales price for all transactions was $3.6 trillion, an increase of over $1.26 trillion or almost 55 percent from 1998 amounts. For Tax Year 1999, $2.5 trillion or 68.6 percent were short-term. These numbers were $1.3 trillion and 58.1 percent respectively for Tax Year 1998. Corporate stock sales accounted for approximately $2.0 trillion of the total sales price, $1.5 trillion for short-term and approximately $480 billion for long-term. Mutual funds were the second largest category having $503.4 billion in sales price, $360.3 billion for short-term and $143.1 billion for long-term.

For 1999, taxpayers reported $530.7 billion net capital gains, an increase of $98.5 billion from the previous year [3]. Short-term sales accounted for a net capital gain less loss of $40.1 billion. For Tax Year 1998, short-term capital losses were larger than gains by 5.5 billion. Long-term sales accounted for $490.6 billion of the total gain amount. Corporate stock, the largest category in terms of net capital gain less loss reported a net gain of approximately $225.1 billion. Of this amount, short-term sales accounted for a net capital gain of $27.2 billion, and long-term sales were a net capital gain of $197.9 billion. Pass-through entities were the second largest category when measured by net gain less loss with $134.0 billion, followed by capital gain distributions with $61.0 billion.