Investments & Capital Gains

Federal capital gains tax with NIIT and state.

Wash sale rule, netting, $3K offset, crypto exception.

3.8% net investment income tax - thresholds and planning.

100% gain exclusion on qualifying C-corp stock.

3.8% surtax. Thresholds NEVER indexed: $200K single, $250K MFJ, $125K MFS. Trust $16,000 (2026). Form 8960. Material participation tests. §1.1411-10(g) CFC election. Bruyea treaty FTC.

OBBBA made QOZ program permanent. New 2027 designation round (decennial cycle). Rolling 5-year deferral. 10% urban / 30% rural QROF basis step-up. 50% rural substantial improvement (immediate). 70% MFI test. 125% MFI cap. Year-30 FMV freeze.

Stock issued after 7/4/2025: 3-tier exclusion (50% at 3yrs, 75% at 4yrs, 100% at 5yrs). Per-issuer cap $15M (up from $10M). Gross asset threshold $75M (up from $50M). 28% rate trap on partial exclusion. §1202(i) no rollover for pre-OBBBA stock. State conformity gaps. §1045 rollover. Stacking strategy.

Section 1256 contracts complete mechanics. Five categories: (1) regulated futures contracts (CME, ICE - ES, CL, GC, ZB); (2) foreign currency contracts (interbank major pairs settling within 2 days); (3) nonequity options (SPX, NDX, RUT broad-based index, commodity, currency options); (4) dealer equity options; (5) dealer securities futures. EXCLUDED: single-stock options (SPY, QQQ, AAPL, TSLA), swaps, narrow-based futures. §1256(a) annual MARK-TO-MARKET at year-end FMV; gain/loss recognized currently. §1256(a)(3) 60/40 RULE: 60% long-term + 40% short-term capital, REGARDLESS of actual holding period. Maximum federal rate ~26.8% (2026). §1256(c) 3-YEAR LOSS CARRYBACK election against prior §1256 gains; Form 1045 fast-track. §1091 wash sale NOT applied. §1256(e) hedge exception (ordinary treatment). §1256(d) mixed straddle elections. §988 forex coordination - spot forex default ordinary; election out to capital available but not to §1256. Form 6781 reporting.

Section 1259 complete mechanics. Requires gain recognition when a taxpayer locks in economic gain on an appreciated financial position (AFP) by eliminating both downside risk and upside potential. AFP = position in stock, debt instrument, or partnership interest with built-in gain. Four constructive sale triggers §1259(c)(1): (A) short sale of same or substantially identical property ("short against the box"); (B) offsetting notional principal contract; (C) futures or forward contract to deliver; (D) acquisition where AFP is itself a short position. Consequences §1259(a): gain recognized at FMV on constructive sale date; basis increased by gain; new holding period begins. Only gain recognized, never loss. Closed transaction exception §1259(c)(3): no constructive sale if offsetting position closed within 30 days after year-end AND taxpayer holds AFP unhedged for 60 days after closing. Variable prepaid forward contract (VPFC) planning to retain meaningful upside and avoid constructive sale (Rev. Rul. 2003-7); Anschutz Co. v. Commissioner (135 T.C. 78, 2010) - VPFC plus share lending was a current sale. Related person attribution §1259(c)(4). Enacted by Taxpayer Relief Act of 1997 to kill short-against-the-box deferral. Form 8949 reporting.

HIFO/FIFO, staking Rev. Rul. 2023-14, Form 1099-DA, wash sale exception.

Property classification, taxable events, record-keeping.

§6045 digital asset broker reporting effective 1/1/2025. 2025 gross proceeds only; 2026 adds basis for covered assets. T.D. 10000 / T.D. 10021. Rev. Proc. 2024-28 wallet-by-wallet basis mandate. Universal accounting eliminated. DeFi rules VACATED by Congressional Review Act March 2025. Notice 2024-56 / Notice 2025-33 transition relief through 2027. Stablecoin and NFT de minimis. Form 8949 reconciliation.

DAF, CRT, CLT, QCD $108K, appreciated property, bunching.

AGI limits, substantiation, noncash contributions.

Covered calls, §1256 index options 60/40, straddle rules.

Margin interest limited to net investment income; Form 4952.

100% capital gains exclusion after 5 years; $10M limit.

$100K ordinary loss on failed startup vs. $3K capital loss limit.

Vesting income, withholding shortfall, basis trap.

Art, coins, gold ETFs, precious metals - 28% vs 20% LTCG.

Rev. Rul. 2023-14, NFT collectibles, Form 1099-DA, HIFO basis.

Ordinary income/loss, §988(e) capital election, hedging exclusion.