Ascher’s intro.
i.     165(c).  This is the pink elephant in the bedroom.  You’ll look at the 1200’s and think you have a deductible loss.  But look at  165(c).  If you’re an individual, you only get to deduct three kinds of losses:
1.    losses incurred in a trade or business
2.    losses incurred in a transaction entered into for profit (stock loss on a .com)
3.    losses incurred in a casualty
ii.    When dealing with capital gains problems, the first thing we have to do is figure out what the hell a capital asset is.
1.     1221 helps in this effort: property held by the taxpayer, whether or not connected with a trade or business.  So my house is a capital asset.  If I sell it at a loss, I’ve got a capital loss; but I can’t deduct it b/c of  165(c).
2.    But note: “capital asset” does not include certain types of property held by the taxpayer:
a.    Inventory (the bag of chips at the store)
b.    Real property or depreciable personal property held in the trade or business
i.    Note:  1221(1)-(8) excludes other things from capital gain treatment.  However,
iii.    The second thing we have to do is figure out whether we’re dealing with a short or long terms capital asset.
1.    Go to  1222(1)-(4) and paint by numbers.  It’s a one-year test.  If you’ve held it for more than one year, LT; if less, ST.
iv.    The third thing we ask is what is the net STKL/STKG?
1.    Look at  1222(5) et seq.
v.    The fourth thing we ask is what is the net LTKL/LTKG?
1.    Look at  1222(5) et seq.
vi.    The fifth and final thing we care about is what is a net KG?