Implications
The fact that the court adopted a fairly broad definition of “sale or exchange” with regard to capital gains and losses is good for taxpayers with regard to realized gains, but bad for taxpayers with regard to realized losses. This is because of the way that ordinary income and ordinary losses are treated relative to the way that capital gains and capital losses are treated.
It should also be noted that § 1001,“determination of amount of and recognition of gain or loss,” provides a definition for “sale or disposition of property,” which is broader than § 1222’s “sale or exchange” definition, as “sale or exchange” are not the only ways to dispose of property.
Read more about this topic: Kenan V. Commissioner
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