In what circumstances is a capital lease a better alternative to an operating lease and under what circumstances is a clapital lease a better alternative than buying an asset?

Under the United States Tax Code, depending on certain conditions, such increases are t…axed under special capital gains rules. Gaining some basic understanding about capital gains can help you to properly structure your retirement cash flow and also, to avoid breaching any IRS rules in this regard.In its broadest sense, a Capital gain is the profit you make when you sell a capital asset. Under IRS regulations, investments such as stocks, mutual fund shares, bonds, precious metals, and other collectibles are classified as capital assets.

Whenever you sell any of these investments at a price higher than what you originally invested, your profit is termed capital gain. For instance, if you buy 100 shares at $10 apiece for a total initial investment of $1,000 and sell them later for $15 per share (for $1,500 total), your capital gain is $500. It is important to keep in mind, though, that capital gains come into play only when you sell the asset involved.

So in the case of this example, although your stock's price went up to $15 per share from $10, you will not have made any capital gains had you decided to keep those shares without selling them. The way a capital gain is taxed will depend on the amount of time that you have owned that investment. This is referred to as your holding period.

Generally, if you have owned a capital asset for 12 months or less, your resulting profit is classified as a short-term capital gain. Alternatively, if you hold a capital asset for a period greater than 12 months, your capital gain is classified as long-term. In terms of taxation, your short-term capital gain is taxed at your ordinary income tax rate with your other regular income.

However, long-term capital gain is taxed differently at one of three rates, depending on your marginal tax bracket in the year that you sold that asset. Currently, if you fall in the bottom two marginal tax brackets (10 percent or 15 percent), you will not be taxed on your long term capital gains. But if you fall anywhere between the 25 percent and 35 percent brackets, your capital gains will be taxed at a flat 15 percent rate.

If you fall in the highest marginal tax bracket of 39.6 percent, your long-term capital gains is taxed at a rate of 20 percent. There is also an additional 3.8 percent surtax that applies if you fall in the 33, 35, or 39.6 percent marginal tax brackets. Some states also tax capital gains.

When applicable, state taxes are usually at your ordinary income tax rates. All things equal, the tax rules relating to capital gains can be rather complex. It therefore behooves you to work closely with your personal tax advisor to ensure that you do not miss anything in this regard.