Loss Of Capital Gain Exclusion A Blow To Taxpayer
UNIVERSITY PARK - Prior to
passage of the Tax Reform Act of
1986 (and since the income tax was
in its infancy in 1921), individual
taxpayers were permitted to
deduct from gross income a per
centage of their net capital gains
for a tax year. In recent years, that
percentage has been 60 percent.
The result of this was a maximum
tax rate of 20 percent on the in
come from the sale of capital
assets (the 50 percent maximum
individual tax rate times the 40
percent of net capital gain included
in adjusted gross income).
Section 1231 of the Internal
Revenue Code provided such
treatment of capital gains for the
sale of property used in the
business. That provision was
particularly valuable to livestock
producers, who typically have
substantial income from the
disposal of cull breeding animals.
The capital gain deduction is
repealed by the new tax legislation
(with the exception noted below),
effective at the end of 1986. Capital
gain, and gain from sale of
property used in the business, is
taxed as ordinary income with the
provision that the maximum rate
on long-term capital gain will not
exceed the maximum individual
rate. For 1987, the maximum
ST. LOUIS Presidents of three foreign rapeseed oil for domestic
national farm organizations sunflower and soybean oil in the
representing U.S. soybean and Puritan brand cooking oil.
sunflower farmers recently ex- “U.S. farmers are suffering
pressed concern over Procter and f rom burdensome supplies, low
Gamble Company’s use of im- prices and a major credit crisis,”
ported rapeseed oil in refor- National Sunflower Association
mulated Puritan cooking oil. president Milton Lakness said in
In a letter to P&G President J.G. toe letter. “There is no need for
Smale, the farm leaders noted the * to switch from U.S.-grown
current crisis in rural America, to a subsidized, foreign oil.
They expressed dismay at the Imports mean fewer jobs and
corporate giant’s substitution of create hardships. Furthermore,
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dividual rates will exceed 28
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The character of gain as capital
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H.W. Naylor Company, Inc.,
Morris, New York 13808. D
disposal of capital assets will
continue to be recognized up to a
maximum of $3,000 in a given year.
An exception to the elimination
of the long-term capital gain ex
clusion is provided by section 406 of
the new law. That section retains
the long-term capital gain ex
clusion for gain from the sale of
this import is more costly to
consumers and claims of health
benefits are controversial.”
The letter challenged P&G of
ficial statements that rapeseed
should be seen as an alternative
crop for U.S. farmers.
“Rapeseed, like com, soy and
sunflower, is a vegetable oil,” said
Soybean Association president
Dave Haggard. “The world is
awash in vegetable oils. Producing
a different type of vegetable oil is
dairy cattle in connection with the
dairy buyout program. To qualify
for the exception, the gain must
relate to sales of dairy cattle as a
result of a valid contract with the
U.S. Department of Agriculture
and the gain must have occurred
during the period from Jan. 1,1987
to Sept. 1,1987.
not an alternative for U.S. farmers
it is merely a substitute! ”
Women involved in Farm
Economics (WIFE) President
Naioma Benson also challenged
P&G’s claim to switch Puritan’s
formulation purely for health
reasons. “If that’s the case, we
want to know why their Criaco
shortening uses highly saturated,
imported palm oil.
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