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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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