Tax Law Term “Avoid Capital Gains Tax“
Capital gains tax may be avoided by a transfer of property which under the Internal Revenue Code is specifically exempted from income tax consequences. For example, a like kind exchange under the Internal Revenue Code Section 1031(a) is free of income tax in that no gain or loss is recognized. The Code requires that such exchanges of property held for productive use in a trade or business or for investment be exchanged solely for property of like kind which is to be held either for productive use in a trade or business or for investment.
A capital gains tax (CGT) is a tax on capital gains, the profit realized on the sale of a non-inventory asset that was greater than the amount realized on the sale. The most common capital gains are realized from the sale of stocks, bonds, precious metals, and property. Not all countries implement a capital gains tax and most have different rates of taxation for individuals and corporations.
In the United States, with certain exceptions, individuals and corporations pay income tax on the net total of all their capital gains. Short-term capital gains are taxed at a higher rate: the ordinary income tax rate. The tax rate for individuals on “long-term capital gains”, which are gains on assets that have been held for over one year before being sold, is lower than the ordinary income tax rate, and in some tax brackets there is no tax due on such gains. Wikipedia
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