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006.05.307-26-51-815. COMPUTING CAPITAL GAINS AND LOSSES

AR ADC 006.05.307-26-51-815Arkansas Administrative Code

West's Arkansas Administrative Code
Title 006. Department of Finance and Administration
Division 05. Division of Revenues
Rule 307. Comprehensive Individual Income Tax Regulations (Refs & Annos)
Ark. Admin. Code 006.05.307-26-51-815
006.05.307-26-51-815. COMPUTING CAPITAL GAINS AND LOSSES
Currentness
1.26-51-815(a) Computing Capital Gains and Losses --- Generally
With respect to capital gains and losses realized or incurred during tax years beginning after December 31, 1990, the following Internal Revenue Code and Regulations shall apply:
Empty Checkbox​ IRC Sections 1211 through 1237, and 1239 through 1257 as in effect on January 1, 1997.
Empty Checkbox​ Corresponding regulations promulgated by the Secretary of the Treasury as in effect on January 1, 1997.
Empty Checkbox​ Any other provisions of the Internal Revenue Code and Regulations necessary for interpreting and implementing the above cited code sections as in effect on January 1, 1997.
However, the provisions of 1.26-51-815(a) shall not apply to C corporations as defined in IRC Sec. 1361 as in effect on January 1, 1997.
1.26-51-815(b) Computation of Tax
If a taxpayer has a net capital gain for a given tax year, the tax on such capital gain shall not exceed the sum of:
1. A tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of:
A) Taxable income reduced by the amount of the net capital gain;
or
B) The amount of taxable income taxed at a rate below six percent (6%);
PLUS
2. A tax of six percent (6%) on the amount of taxable income in excess of the amount determined under subdivision (1) above.
IRC Section 1222 defines “net capital gain” as the excess of the net long-term capital gain for the taxable year over the net short-term capital loss for such year.
CAPITAL GAINS
EXAMPLE 1: Mr. Jones, a single taxpayer with no dependents, reported a net taxable income of $40,000.00 after itemized deductions. The income and deductions were comprised of the following:
Wages
 
$ 30,000.00
Interest
 
$ 500.00
Net Capital Gain
 
$ 15,000.00
Total Income
 
$ 45,500.00
Less Itemized Deductions
 
($ 5,500.00)
Net Taxable Income
 
$ 40,000.00
Mr. Jones' Tax Liability is calculated as follows:
ORDINARY INCOME:
Wages
 
$ 30,000.00
Interest
 
$ 500.00
Total Ordinary Income
 
$ 30,500.00
Less Itemized Deductions
 
($ 5,500.00)
Subtotal #1
 
$ 25,000.00
Tax on Subtotal #1 (Using the Itemized Deduction Tax Table)
 
$ 1,084.00
Net Capital Gain Income
 
$ 15,000.00
Tax on Net Capital Gains (Maximum tax rate of 6%)
 
$ 900.00
TOTAL TAX LIABILITY .
$ 1,984.00
REMINDER: Normal Arkansas Tax rates are graduated from 1% to 6% up to $ 25,000.00 and 7% for income $ 25,000.00 and above. The maximum tax rate for Net Capital Gains cannot exceed 6%.
CAPITAL GAINS
EXAMPLE 2: Same as Example 1 but the wages equal $ 15,000.00 and net taxable income equals $ 25,000.00.
Mr. Jones' Tax Liability is calculated as follows:
ORDINARY INCOME:
Wages
 
$ 15,000.00
Interest
 
$ 500.00
Total Ordinary Income
 
$ 15,500.00
Less Itemized Deductions
 
($ 5,500.00)
Subtotal #1
 
$ 10,000.00
Since Subtotal #1 is less than $ 25,000.00, add the Capital Gain up to this amount.
Capital Gains
 
$ 15,000.00
TOTAL TAX LIABILITY .
$ 1,984.00
CAPITAL GAINS
EXAMPLE 3: Same as Example 1 but wages equal $ 50,000.00 and net taxable income equal $ 60,000.00.
Mr. Jones' Tax Liability is calculated as follows:
ORDINARY INCOME:
Wages
 
$ 50,000.00
Interest
 
$ 500.00
Total Ordinary Income
 
$ 50,500.00
Less Itemized Deductions
 
($ 5,500.00)
Subtotal #1
 
$ 45,000.00
Tax on Subtotal #1 (Using the Itemized Deduction Tax Table)
 
$ 2,484.00
Capital Gains
 
$ 15,000.00
Tax on Long Term Capital Gains (Maximum tax rate of 6%)
 
$ 900.00
TOTAL TAX LIABILITY .
$ 3,384.00
1.26-51-815(c) Exclusion of Small Business Stock from Gain
IRC Sec. 1202, as in effect on January 1, 1995 regarding the exclusion from gain of certain small business stock, is adopted for the purpose of computing Arkansas income tax liability.
Current with amendments received through August 15, 2023. Some sections may be more current, see credit for details.
Ark. Admin. Code 006.05.307-26-51-815, AR ADC 006.05.307-26-51-815
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