PLease help.

Question

“Unliquidated capital assets are not considered income, and parents are not required to deplete their capital assets in order to establish dependency on a member for BAH purposes. However, proceeds derived from the liquidation of capital assets are considered income.”

In the highlighted, is it saying selling assets is considered income? Like if you sale a piece of land for one hundred thousand dollar, all of that money is income? I couldn’t understand what it is saying. Please help.

Clive · Accepted Answer

I can't see your high-lighting.

Yes, that's what your text says.

AlpheccaStars · Answer

anonymousLike if you sale a piece of land for one hundred thousand dollar, all of that money is income?

It isn't clear from your snippet, but I would bet that the "income" is the difference between the selling price and the original purchase price. It is ordinary income if the asset was held for less than one year, and capital gains income if held longer than one year.

American tax law treats the sale of capital assets (held more than one year) differently from ordinary income. For example, your family bought a rent house in 2005 for $150,000 dollars, but was forced to sell it for $100,000 in 2008. That would have been considered a long-term capital loss of $50,000. Suppose they bought a rent house for $100,000 in 2008 and sold it for $200,000 in 2017. That is a $100,000 long-term capital gain, which is a type of income that is taxed at capital gains rates (not ordinary income).

Capital gains and losses on the family's primary residence are subject to different rules.

PLease help.

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