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

Statistics of Income Bulletin, Summer, 2003 by Janette Wilson

Other land--Includes undeveloped land other than farmland.

Residences.--Principal residences.

Other assets.--Includes other assets not included in the above categories, such as collectibles, bad debts, and copyrights.

Unidentifiable.--Includes assets where the description is unreadable, unidentifiable, or not present.

Pass-through gains and losses.--Includes capital gains on assets sold by partnerships, S corporations, and estates and trusts, and distributed to be taxed at the individual partner, shareholder, and beneficiary level.

Capital gain distributions.--Distributions by mutual funds to shareholders of capital gains from sales of assets by mutual funds.

Other Terms:

Basis.--The original cost of the investment adjusted by adding the cost of expenses of the sale or any improvement costs. In addition, depreciation, amortization, and depletion deductions are subtracted.

Sales price.--The gross selling price of the asset, including the cash or fair market value of other property received.

Capital Asset.--Property owned and used for investment, personal, or pleasure uses.

Gain (or loss).--The difference between the sales price and the cost or other basis, less any depreciation.

Net capital gains.--Capital gains less capital losses.

Section 1231 gains and losses.--Property used for trade or business, property held for the production of rents and royalties, and property subjected to an involuntary conversion.

Short-term.--The holding period for short-term capital gains and losses is 1 year or less.

Long-term.--The holding period for long-term capital gains and losses is more than 1 year.

Data Source and Limitations

The statistics in this report are estimates from a probability subsample of unaudited Individual Income Tax Returns, Forms 1040, 1040A, 1040EZ, and 1040PC (including electronic returns) filed by U.S. citizens and residents during Calendar Year 2000.

The sample design is a stratified probability sample, in which the population of tax returns is classified into subpopulations, called strata, and a sample is randomly selected independently from each stratum. Strata are defined by:

1. Nontaxable with adjusted gross income or expanded income of $200,000 or more and no alternative minimum tax.

2. High combined business and farm total receipts of $50,000,000 or more.

3. Presence or absence of special Forms or Schedules (Form 2555, Form 1116, Form 1040 Schedule C, and Form 1040 Schedule F).

4. Indexed positive or negative income. Sixty variables are used to derive positive and negative incomes. These positive and negative income classes are deflated using Chain-Type Price Index for the Gross Domestic Product to represent a base year of 1991.

5. Potential usefulness of the return for tax policy modeling. Thirty-two variables are used to determine how useful the return is for tax modeling purposes.

The Sales of Capital Assets Study is a sub-sample of the original sample. Records are selected for the sample and subsample either if they possess certain combinations of the four ending digits of the Social Security number, or if their ending five digits of an eleven-digit number generated by a mathematical transformation of the SSN are less than or equal to the stratum sample or subsampling rate times 100,000. The Tax Year 1999 estimates for the Sale of Capital Assets Study are based on a subsample of 121,053 returns randomly selected from an original sample of 176,966 returns and a final population of 127,321,626 returns. The original sample was used to produce the estimates in previously published SOI reports for Tax Year 1999, such as Statistics of Income--Individual Income Tax Returns 1999, Publication 1304.