Invest in assets that produce gain subject to capital gain tax

Always take care to invest in assets that produce gains subject to capital gains tax. You can make £8,800 tax-free gains in one tax year (for 2006/07), but this is after a discount for taper relief, which reduces capital gains by up to 35% this year for non-business assets and up to 75% for business assets. So you can sell quoted shares (non-business assets unless you work for the company) held since 1997, make a gain of £13,500 and still pay no capital gains tax! The sale of a business asset held for two years or longer can yield up to £35,200 of tax-free gain.

If you hold Stocks, Bonds, Mutual Fund shares, or land held for investment purposes, the gain or loss is capital and should be reported in Form 1040, Schedule D. Capital gain/loss is also considered for selling of personal residence, autos, jewellery, furniture, art, coin or stamp collections, etc. In selling the accounts or notes acquired in the ordinary course of business or from sales of inventory or property held for sale to customers, the gain or loss is called ordinary gain or loss. So it should be reported in Form 1040 or Form 4797.