Capital gains taxes and in kind purchase offset

Forum|Forum|1 year ago
May 22, 2024
1 reply
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Is it possible to incur capital gains and then separately sell products at a loss with the result being a reduction in capital gains taxes?

Ask the Experts - Biz Tax - May 2024

mirthaguer

Your question as I understand it is that you have capital gains and want to claim an expense for a product to lower your tax liability. You have two separate transactions. Capital gains are reduced by capital losses. If no capital losses you will show in your income tax the capital gain. The the other transaction you site is selling products to deduct against the gain. I think this is mixing apples and oranges. If you have a business and you sell a product that will be an expense, but you will also have the income from the sale of the product.

travottttAuthor

What about if the product is sold at less than cost? Will my overall taxes be less because my total income will be less because the loss on product sales offsets the capital gains from sale of stock?

NateTheGrEAt

Employee

If your business operates at a loss, your business losses are netted against all other types of income. Losses from a business would be considered ordinary losses, not capital losses. Therefore, they are not specifically offset against your capital gains. So you would still have the capital gains income but would have ordinary losses that reduce your total income.

In general, since long-term capital gains are taxed at a lower rate than ordinary income, an ordinary loss (such as a loss from business) is more tax beneficial than a capital loss.

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