Part I of Form 6781 and identify the election by checking

box B.

If the net gain or loss is due to the non-section 1256 positions, it is a short-term capital gain or loss. See the Form 6781 instructions for how to report the net gain or loss. For the specific application of the rules of this election, see Regulations sections 1.1092(b)-3T and 1.1092(b)-6.

Example 1. A straddle was established on or before August 18, 2014. On April 2, 2014, you entered into a non-section 1256 position and an offsetting section 1256 contract. You also made a valid election to treat this straddle as an identified mixed straddle. On April 9, 2014, you disposed of the non-section 1256 position at a $600 loss and the section 1256 contract at an $800 gain. Under these circumstances, the $600 loss on the non-section 1256 position was offset against the $800 gain on the section 1256 contract. The net gain of $200 from the straddle was treated as 60% long-term capital gain and 40% short-term capital gain because it was due to the section 1256 contract.

Example 2. A straddle was established after August 18, 2014. On December 2, 2024, you entered into a non-section 1256 position for $100. At the end of the day on January 24, 2025, the position had a value of $500. On January 27, 2025, you entered into an offsetting section 1256 position. You elected to treat the straddle as an identified mixed straddle.

On February 12, 2025, you closed out the section 1256 contract at a $500 loss and disposed of the non-section 1256 position for $975. Prior to entering into the identified mixed straddle, you had a $400 unrealized short-term capital gain on the non-section 1256 position. When you disposed of the non-section 1256 position on February 12, 2025, you recognized the $400 gain. This gain is figured as though you had disposed of the position on the day prior to establishing the identified mixed straddle.

You also realized a gain of $475 ($975 proceeds – $500 value before entering into the identified mixed straddle). This gain is offset by the $500 loss on the section 1256 contract for a net loss of $25. This net loss is recognized and treated as 60% long-term capital loss and 40% short-term capital loss attributable to the section 1256 contract.

Mixed straddle account (Election C). You may elect to establish one or more accounts for determining gains and losses from all positions in a mixed straddle. You must establish a separate mixed straddle account for each separate designated class of activities.

Generally, you must determine gain or loss for each position in a mixed straddle account by the close of each business day of the tax year. You offset the net section 1256 contracts against the net non-section 1256 positions to determine the “daily account net gain or loss.”

If the daily account amount is due to non-section 1256 positions, the amount is treated as short-term capital gain or loss. If the daily account amount is due to section 1256 contracts, the amount is treated as 60% long-term and 40% short-term capital gain or loss.

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On the last business day of the tax year, you determine the “annual account net gain or loss” for each account by netting the daily account amounts for that account for the tax year. The “total annual account net gain or loss” is determined by netting the annual account amounts for all mixed straddle accounts that you had established.

The net amounts keep their long-term or short-term classification. However, no more than 50% of the total annual account net gain for the tax year can be treated as long-term capital gain. Any remaining gain is treated as short-term capital gain. Also, no more than 40% of the total annual account net loss can be treated as short-term capital loss. Any remaining loss is treated as long-term capital loss.

The election to establish one or more mixed straddle accounts for each tax year must be made by the due date (without extensions) of your income tax return for the immediately preceding tax year. If you begin trading in a new class of activities during a tax year, you must make the election for the new class of activities by the later of either:

• The due date of your return for the immediately preceding tax year (without extensions), or

• 60 days after you entered into the first mixed straddle in the new class of activities.

You make the election on Form 6781 by checking box C. Attach Form 6781 to your income tax return for the immediately preceding tax year, or file it within 60 days, if that applies. Report the annual account net gain or loss from a mixed straddle account in Part II of Form 6781. In addition, you must attach a statement to Form 6781 specifically designating the class of activities for which a mixed straddle account is established.

For the specific application of the rules of this election, see Regulations section 1.1092(b)-4T.

Interest expense and carrying charges relating to mixed straddle account positions. You cannot deduct interest and carrying charges that are allocable to any positions held in a mixed straddle account. Treat these charges as an adjustment to the annual account net gain or loss and allocate them proportionately between the net short-term and the net long-term capital gains or losses.

To find the amount of interest and carrying charges that is not deductible and that must be added to the annual account net gain or loss, apply the rules described earlier to the positions held in the mixed straddle account. See In- terest expense and carrying charges on straddles in chapter 3.

For special rules on the deferral of gain related to a straddle where the gain is invested in a Qualified Opportunity Fund, see section 1400Z-2 for more details.

Sales of Stock to Employee Stock Ownership Plans (ESOPs) or Certain Cooperatives

If you sold qualified securities held for at least 3 years to an ESOP or eligible worker-owned cooperative, you may be able to elect to postpone all or part of the gain on the sale if you bought qualified replacement property (certain

securities) within the period that began 3 months before the sale and ended 12 months after the sale. If you make the election, you must recognize gain on the sale only to the extent the proceeds from the sale exceed the cost of the qualified replacement property.

You must reduce the basis of the replacement property by any postponed gain. If you dispose of any replacement property, you may have to recognize all of the postponed gain.

Generally, to qualify for the election, the ESOP or cooperative must own at least 30% of the outstanding stock of the corporation that issued the qualified securities. Also, the qualified replacement property must have been issued by a domestic operating corporation.

How to make the election. You must make the election no later than the due date (including extensions) for filing your tax return for the year in which you sold the stock. If your original return was filed on time, you may make the election on an amended return filed no later than 6 months after the due date of your return (excluding extensions). Enter “Filed pursuant to section 301.9100-2” at the top of the amended return and file it at the same address you used for your original return.

How to report and postpone gain. Report the sale in Part II of Form 8949 as you would if you were not making the election. Then enter “R” in column (f). Enter the amount of the postponed gain as a negative number in column (g). Put it in parentheses to show it is negative. Complete all remaining columns. If the actual postponed gain is different from the amount you report, file an amended return.

Caution: Report your sales of stock to ESOPs or certain cooperatives on Form 8949 with the correct box checked for these transactions. See Form 8949 and the Instructions for Form 8949.

Also attach the following statements.

1. A “statement of election” that indicates you are making an election under section 1042(a) of the Internal Revenue Code and that includes the following information.

a. A description of the securities sold, including the

type and number of shares, the date of the sale, the amount realized on the sale, and the adjusted basis of the securities.

b. The name of the ESOP or cooperative to which

the qualified securities were sold.

c. For a sale that was part of a single interrelated

transaction under a prearranged agreement between taxpayers involving other sales of qualified securities, the names and identifying numbers of the other taxpayers under the agreement, and the number of shares sold by the other taxpayers.

2. A notarized “statement of purchase” describing the qualified replacement property, date of purchase, and the cost of the property and declaring the property to

96 Chapter 4 Sales and Trades of Investment Property Publication 550 (2025)

be qualified replacement property for the qualified stock you sold. The statement must have been notarized no later than 30 days after the purchase. If you have not yet purchased the qualified replacement property, you must attach the notarized “statement of purchase” to your income tax return for the year following the election year (or the election will not be valid).

3. A verified written statement of the domestic corporation whose employees are covered by the ESOP acquiring the securities, or of any authorized officer of the cooperative, consenting to the taxes under sections 4978 and 4979A of the Internal Revenue Code on certain dispositions, and prohibited allocations of the stock purchased by the ESOP or cooperative.

More information. For details, see section 1042 of the Internal Revenue Code and Regulations section 1.1042-1T.

Gains on Qualified Small Business Stock

This section discusses two provisions of the law that may apply to gain from the sale or trade of qualified small business stock. You may qualify for a tax-free rollover of all or part of the gain. You may be able to exclude gain from your income.

Qualified small business stock. This is stock that meets all the following tests.

1. It must be stock in a C corporation.

2. It must have been originally issued after August 10,

4. The corporation must have total gross assets of $50 million or less at all times after August 9, 1993, and before it issued the stock. Its total gross assets immediately after it issued the stock must also be $50 million or less.

When figuring the corporation's total gross assets, you must also count the assets of any predecessor of the corporation. In addition, you must treat all corporations that are members of the same parent-subsidiary controlled group as one corporation.

4. You must have acquired the stock at its original issue, directly or through an underwriter, in exchange for money or other property (not including stock), or as pay for services provided to the corporation (other than services performed as an underwriter of the stock). In certain cases, your stock may also meet this test if you acquired it from another person who met this test, or through a conversion or trade of qualified small business stock that you held.

5. The corporation must have met the active business test, defined next, and must have been a C corporation during substantially all the time you held the stock.

6. Within the period beginning 2 years before and ending 2 years after the stock was issued, the corporation cannot have bought more than a de minimis amount of its stock from you or a related party.

7. Within the period beginning 1 year before and ending 1 year after the stock was issued, the corporation cannot have bought more than a de minimis amount of its stock from anyone, unless the total value of the stock it bought is 5% or less of the total value of all its stock.

For more information about tests 6 and 7, see the regulations under section 1202 of the Internal Revenue Code.

Active business test. A corporation meets this test for any period of time if, during that period, both the following are true.

• It was an eligible corporation, defined below.

• It used at least 80% (by value) of its assets in the active conduct of at least one qualified trade or business, defined below.

Exception for Specialized Small Business Invest- ment Company (SSBIC). Any SSBIC is treated as meeting the active business test. An SSBIC is an eligible corporation licensed to operate under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993.

Eligible corporation. This is any U.S. corporation other than:

• A Domestic International Sales Corporation (DISC) or a former DISC;

• A corporation that has made, or whose subsidiary has made, an election under section 936 of the Internal Revenue Code;

• A regulated investment company;

• A REIT;

• A REMIC;

• Certain financial asset securitization investment trusts (FASITs); or

• A cooperative.

Qualified trade or business. This is any trade or business other than:

• One involving services performed in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, or brokerage services;

• One whose principal asset is the reputation or skill of one or more employees;

• Any banking, insurance, financing, leasing, investing, or similar business;

• Any farming business (including the business of raising or harvesting trees);

• Any business involving the production or extraction of products for which percentage depletion can be claimed; or

Publication 550 (2025) Chapter 4 Sales and Trades of Investment Property 97

• Any business of operating a hotel, motel, restaurant, or similar business.

Rollover of Gain

You may qualify for a tax-free rollover of capital gain from the sale of qualified small business stock held more than 6 months. This means that, if you buy certain replacement stock and make the choice described in this section, you postpone part or all of your gain.

You postpone the gain by adjusting the basis of the replacement stock as described in Basis of replacement stock , later. This postpones your gain until the year you dispose of the replacement stock.

You can make this choice if you meet all the following tests.

• You buy replacement stock during the 60-day period beginning on the date of the sale.

• The replacement stock is qualified small business stock.

• The replacement stock continues to meet the active business requirement for small business stock for at least the first 6 months after you buy it.

Amount of gain recognized. If you make the choice described in this section, you must recognize the capital gain only up to the following amount.

• The amount realized on the sale, minus

• The cost of any qualified small business stock you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of qualified small business stock).

If this amount is less than the amount of your capital gain, you can postpone the rest of that gain. If this amount equals or is more than the amount of your capital gain, you must recognize the full amount of your gain.

Basis of replacement stock. You must subtract the amount of postponed gain from the basis of your replacement stock.

Holding period of replacement stock. Your holding period for the replacement stock includes your holding period for the stock sold, except for the purpose of applying the 6-month holding period requirement for choosing to roll over the gain on its sale.

Pass-through entity. A pass-through entity (a partnership, S corporation, or mutual fund or other regulated investment company) may also make the choice to postpone gain. The benefit of the postponed gain applies to your share of the entity's postponed gain if you held an interest in the entity for the entire period the entity held the stock.

If a pass-through entity sold qualified small business stock held for more than 6 months and you held an interest in the entity for the entire period the entity held the stock, you may also choose to postpone gain if you, rather

than the pass-through entity, buy the replacement stock within the 60-day period.

How to report gain. Report the entire gain realized from the sale in Part I or Part II of Form 8949. To make the election to postpone gain, report the gain as you would if you were not making the election. Enter “R” in column (f). Enter the amount of the postponed gain as a negative number in column (g). Put it in parentheses to show it is negative. Complete all remaining columns.

You must make the choice to postpone gain no later than the due date (including extensions) for filing your tax return for the year in which you sold the stock. If your original return was filed on time, you may make the choice on an amended return filed no later than 6 months after the due date of your return (excluding extensions). Enter “Filed pursuant to section 301.9100-2” at the top of the amended return and file it at the same address you used for your original return.

Section 1202 Exclusion

You can exclude from your gross income up to 50% of your gain from the sale or exchange of qualified small business stock (QSBS) held for at least 5 years, and acquired before February 17, 2009. The exclusion can be up to 75% for QSBS acquired between February 17, 2009, and September 27, 2010, and up to 100% exclusion for QSBS acquired after September 27, 2010. For further information about changes to section 1202, see section 1202 of the Internal Revenue Code.

Specialized Small Business Investment Company (SSBIC) stock. If the stock is SSBIC stock you bought as replacement property for publicly traded securities you sold at a gain before 2018, you must reduce the basis of the stock by the amount of any postponed gain on that earlier sale. But do not reduce your basis by that amount when figuring your section 1202 exclusion.

Limit on eligible gain. The amount of your gain from the stock of any one issuer that is eligible for the exclusion in 2022 is limited to the greater of:

• Ten times your basis in all qualified stock of the issuer you sold or exchanged during the year; or

• $10 million ($5 million for married individuals filing separately), minus the amount of gain from the stock of the same issuer you used to figure your exclusion in earlier years.

How to report gain. Report the sale or exchange on Form 8949, Part II, with the appropriate box checked, as you would if you were not taking the exclusion. Then enter “Q” in column (f) and enter the amount of the excluded gain as a negative number in column (g). Put it in parentheses to show it is negative. Complete all remaining columns. If you are completing line 18 of Schedule D (Form 1040), enter as a positive number the amount of the exclusion on line 2 of the 28% Rate Gain Worksheet in the Schedule D (Form 1040) instructions. But if you exclude 60% of the gain, enter ² /3 of the exclusion. If you exclude

98 Chapter 4 Sales and Trades of Investment Property Publication 550 (2025)

75% of the gain, enter ¹ /3 of the exclusion. If you exclude 100% of the gain, do not enter an amount.

More information. For information about additional requirements that may apply, see section 1202 of the Internal Revenue Code.

Empowerment zone business stock. You can exclude up to 60% of your gain if you meet all the following additional requirements.

1. You sell or trade stock in a corporation that qualifies as an empowerment zone business during substantially all of the time you held the stock.

2. You acquired the stock after December 21, 2000, and before February 18, 2009.

3. The gain from the sale or exchange of the stock is attributable to periods on or before December 31, 2018.

Condition 1 will still be met if the corporation ceased to qualify after the 5-year period that begins on the date you acquired the stock. However, the gain that qualifies for the 60% exclusion cannot be more than the gain you would have had if you had sold the stock on the date the corporation ceased to qualify.

Note: If either the 75% or 100% exclusion applies, then the 60% exclusion does not apply.

Exclusion of Gain From DC Zone Assets

If you sold or exchanged a District of Columbia Enterprise Zone (DC Zone) asset that you acquired after 1997 and before 2012 and held for more than 5 years, you may be able to exclude the amount of qualified capital gain that you would otherwise include in income. The exclusion applies to an interest in, or property of, certain businesses operating in the District of Columbia.

How to report. Report the sale or exchange on Form 8949, Part II, as you would if you were not taking the exclusion. Enter “X” in column (f) and enter the amount of the exclusion as a negative number in column (g). Put the amount in parentheses to show it is negative. See the instructions for Form 8949, columns (f), (g), and (h). Complete all remaining columns.

Rollover of Gain From Empowerment Zone Assets

The election to roll over gain from the sale of empowerment zone assets doesn’t apply to sales in tax years beginning after 2020. See section 1397B.

Note: If, in 2025, you disposed of any digital asset, which you held as a capital asset, through a sale, trade, exchange, payment, or other transfer, check “Yes” and use Form 8949 to calculate your capital gain or loss and report that gain or loss on Schedule D (Form 1040). For more information on how to report Digital Asset Transactions, see Form 1040 Instructions.

Generally, report capital gains and losses on Form 8949. Complete Form 8949 before you complete line 1b, 2, 3, 8b, 9, or 10 of Schedule D (Form 1040).

Use Form 8949 to report:

• The sale or exchange of a capital asset not reported on another form or schedule,

• Gains from involuntary conversions (other than from casualty or theft) of capital assets not held for business or profit,

• Nonbusiness bad debts, and

• Worthlessness of a security.

Use Schedule D (Form 1040) to report:

• Overall gain or loss from transactions reported on Form 8949;

• Certain transactions you do not have to report on Form 8949;

• Gain from Form 2439, 6252, or Part I of Form 4797;

• Gain or loss from Form 4684, 6781, or 8824;

• Gain or loss from a partnership, S corporation, estate, or trust;

• Capital gain distributions not reported directly on your Form 1040 or 1040-SR, line 7a (or effectively connected capital gain distributions not reported directly on Form 1040-NR, line 7a); and

• Capital loss carryover from the previous year to the current year.

On Form 8949, enter all sales and exchanges of capital assets, including stocks, bonds, real estate, etc., (if not reported on Form 4684, 4797, 6252, 6781, 8824, or line 1a or 8a of Schedule D (Form 1040)). Include these transactions even if you did not receive a Form 1099-B or Form 1099-S, Proceeds From Real Estate Transactions, for the transaction. Report short-term gains or losses in Part I. Report long-term gains or losses in Part II. Use as many Forms 8949 as you need.

Exceptions to filing Form 8949 and Schedule D (Form 1040). There are certain situations where you may not have to file Form 8949 and/or Schedule D (Form 1040).

Exception 1. You do not have to file Form 8949 or Schedule D (Form 1040) if you have no capital losses and your only capital gains are capital gain distributions from

Publication 550 (2025) Chapter 4 Sales and Trades of Investment Property 99

box 2a of Form(s) 1099-DIV. If any Form 1099-DIV you receive has an amount in box 2b (unrecaptured section 1250 gain), box 2c (section 1202 gain), or box 2d (collectibles (28%) gain), you do not qualify for this exception.

If you qualify for this exception, report your capital gain distributions directly on Form 1040, line 7a, and check the box on that line. Also use the Qualified Dividends and Capital Gain Tax Worksheet in the Instructions for Forms 1040 to figure your tax.

Exception 2. You must file Schedule D (Form 1040), but generally do not have to file Form 8949, if Exception 1 above does not apply and your only capital gains and losses are:

• Capital gain distributions;

• A capital loss carryover;

• A gain from Form 2439, 6252, or Part I of Form 4797;

• A gain or loss from Form 4684, 6781, or 8824;

• A gain or loss from a partnership, S corporation, estate, or trust; or

• Gains and losses from transactions for which you received a Form 1099-B that shows basis was reported to the IRS, for which the Ordinary box in box 2 is not checked, and for which you do not need to make any adjustments in column (g) of Form 8949 or enter any codes in column (f) of Form 8949.

Installment sales. You cannot use the installment method to report a gain from the sale of stock or securities traded on an established securities market. You must report the entire gain in the year of sale (the year in which the trade date occurs).

At-risk rules. Special at-risk rules apply to most income-producing activities. These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. The at-risk rules also apply to a loss from the sale or trade of an asset used in an activity to which the at-risk rules apply. For more information, see Pub. 925. Use Form 6198, At-Risk Limitations, to figure the amount of loss you can deduct.

Passive activity gains and losses. If you have gains or losses from a passive activity, you may also have to report them on Form 8582. In some cases, the loss may be limited under the passive activity rules. Refer to Form 8582 and its instructions for more information about reporting capital gains and losses from a passive activity.

Form 1099-B transactions. If you sold property, such as stocks, bonds, or certain commodities, through a broker, you should receive Form 1099-B from the broker. Use the Form 1099-B to complete Form 8949 and/or Schedule D (Form 1040).

If you received a Form 1099-B for a transaction, you usually report the transaction on Form 8949. Report the proceeds shown in box 1d of Form 1099-B in column (d) of either Part I or Part II of Form 8949, whichever applies.

Include in column (g) any selling expenses or option premiums not reflected in box 1d or box 1e of Form

1099-B. If you include a selling expense in column (g), enter “E” in column (f).

Enter the basis shown in box 1e in column (e). If the basis shown on Form 1099-B is not correct, see the table How To Complete Form 8949, Columns (f) and (g), in the Instructions for Form 8949 for the adjustment you must make. If no basis is shown on Form 1099-B, enter the correct basis of the property in column (e). See the instructions for Form 1099-B, Form 8949, and Schedule D (Form 1040) for more information.

Example 1. You sold 100 shares of Fund HIJ for $2,500. You paid a $75 commission to the broker for handling the sale. Your Form 1099-B shows that the net sales proceeds, $2,425 ($2,500 − $75), were reported to the IRS. Report $2,425 in column (d) of Form 8949. Complete columns (a), (b), (c), and (e).

Example 2. You sold 200 shares of Fund KLM for $10,000. You paid a $100 commission at the time of the sale. The broker reported the gross proceeds to the IRS on Form 1099-B, so on Form 8949, you enter “E” in column (f), $10,000 in column (d), and $100 as a negative adjustment in column (g). Complete all remaining columns.

Section 1256 contracts and straddles. Use Form 6781 to report gains and losses from section 1256 contracts and straddles before entering these amounts on Schedule D (Form 1040). Include a copy of Form 6781 with your income tax return.

Market discount bonds. Report the sale or trade of a market discount bond on Part I or Part II of Form 8949, whichever is appropriate. See the table How To Complete Form 8949, Columns (f) and (g), in the Instructions for Form 8949 to help you figure the amounts to report for a sale or trade of a market discount bond. Use the Worksheet for Accrued Market Discount Adjustment in Column (g) in those instructions to figure the adjusted accrued market discount. Also report the amount of accrued market discount as interest income on Schedule B (Form 1040), line 1, and identify it as “Accrued Market Discount.” See the Instructions for Form 8949 for more information.

Form 1099-CAP transactions. If a corporation in which you own stock has had a change in control or a substantial change in capital structure, you should receive a Form 1099-CAP, Changes in Corporate Control and Capital Structure, from the corporation. Use the Form 1099-CAP to fill in Form 8949. If your computations show that you would have a loss because of the change, do not enter any amounts on Form 8949 or Schedule D (Form 1040) as a result of this transaction.

Report the aggregate amount received shown in box 2 of Form 1099-CAP as the sales price in column (d) of either Part I or Part II of Form 8949, whichever applies.

Form 1099-S transactions. If you sold or traded reportable real estate, you should generally receive, from the real estate reporting person, a Form 1099-S showing the gross proceeds.

100 Chapter 4 Sales and Trades of Investment Property Publication 550 (2025)

“Reportable real estate” is defined as any present or future ownership interest in any of the following.

• Improved or unimproved land, including air space.

• Inherently permanent structures, including any residential, commercial, or industrial building.

• A condominium unit and its accessory fixtures and common elements, including land.

• Stock in a cooperative housing corporation (as defined in section 216 of the Internal Revenue Code).

• Any non contingent interest in standing timber.

A “real estate reporting person” could include the buyer's attorney, your attorney, the title or escrow company, a mortgage lender, your broker, the buyer's broker, or the person acquiring the biggest interest in the property.

Your Form 1099-S will show the gross proceeds from the sale or exchange in box 2. See the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040) for how to report these transactions and include them in Part I or Part II of Form 8949, as appropriate. However, report like-kind exchanges on Form 8824 instead.

It is unlawful for any real estate reporting person to separately charge you for complying with the requirement to file Form 1099-S.

Nominees. If you receive gross proceeds as a nominee (that is, the gross proceeds are in your name but actually belong to someone else), see the Instructions for Form 8949 for how to report these amounts on Form 8949.

File Form 1099-B or Form 1099-S with the IRS. If you received gross proceeds as a nominee in 2025, you must file a Form 1099-B or Form 1099-S for those proceeds with the IRS. Send the Form 1099-B or Form 1099-S with a Form 1096 to your Internal Revenue Service Center by March 2, 2026 (March 31, 2026, if you file Form 1099-B or Form 1099-S electronically). Give the actual owner of the proceeds Copy B of the Form 1099-B or Form 1099-S by February 16, 2026. On Form 1099-B, you should be listed as the “Payer.” The actual owner should be listed as the “Recipient.” On Form 1099-S, you should be listed as the “Filer.” The actual owner should be listed as the “Transferor.” You do not have to file a Form 1099-B or Form 1099-S to show proceeds for your spouse. For more information about the reporting requirements and the penalties for failure to file (or furnish) certain information returns, see the General Instructions for Certain Information Returns.

Sale of property bought at various times. If you sell a block of stock or other property that you bought at various times, report the short-term gain or loss from the sale on one row in Part I of Form 8949 and the long-term gain or loss on one row in Part II of Form 8949. Enter “Various” in column (b) for the “Date acquired.”

Sale expenses. On Form 8949, include in column (g) any expense of sale, such as broker's fees, commissions, state and local transfer taxes, and option premiums, unless you reported the net sales price in column (d). If you

include an expense of sale in column (g), enter “E” in column (f).

Short-term gains and losses. Capital gain or loss on the sale or trade of investment property held 1 year or less is a short-term capital gain or loss. You report it in Part I of Form 8949.

You combine your share of short-term capital gain or loss from partnerships, S corporations, and fiduciaries, and any short-term capital loss carryover, with your other short-term capital gains and losses to figure your net short-term capital gain or loss on line 7 of Schedule D (Form 1040).

Long-term gains and losses. A capital gain or loss on the sale or trade of investment property held more than 1 year is a long-term capital gain or loss. You report it in Part II of Form 8949.

You also report the following in Part II of Schedule D (Form 1040).

• Undistributed long-term capital gains from a mutual fund (or other regulated investment company) or REIT.

• Your share of long-term capital gains or losses from partnerships, S corporations, and fiduciaries.

• All capital gain distributions from mutual funds and REITs not reported directly on Form 1040, line 7a.

• Long-term capital loss carryovers.

The result after combining these items with your other long-term capital gains and losses is your net long-term capital gain or loss (line 15 of Schedule D (Form 1040)).

Total net gain or loss. To figure your total net gain or loss, combine your net short-term capital gain or loss (Schedule D (Form 1040), line 7) with your net long-term capital gain or loss (Schedule D (Form 1040), line 15). Enter the result on Schedule D (Form 1040), Part III, line 16. If your losses are more than your gains, see Capital Los- ses, next. If both lines 15 and 16 of your Schedule D (Form 1040) are gains and your taxable income on your Form 1040 is greater than zero, see Capital Gain Tax Rates, later.

Capital Losses

If your capital losses are more than your capital gains, you can claim a capital loss deduction. Report the deduction on Form 1040, line 7a, enclosed in parentheses.

Limit on deduction. Your allowable capital loss deduction, figured on Schedule D (Form 1040), is the lesser of:

• $3,000 ($1,500 if you are married and file a separate return), or

• Your total net loss as shown on line 16 of Schedule D (Form 1040).

You can use your total net loss to reduce your income dollar for dollar, up to the $3,000 limit.

Capital loss carryover. If you have a total net loss on line 16 of Schedule D (Form 1040) that is more than the

Publication 550 (2025) Chapter 4 Sales and Trades of Investment Property 101

Worksheet 4-1. Capital Loss Carryover Worksheet Keep for Your Records

Use this worksheet to figure your capital loss carryovers from 2024 to 2025 if your 2024 Schedule D (Form 1040), line 21, is a loss and (a) that loss is a smaller loss than the loss on your 2024 Schedule D (Form 1040), line 16, or (b) if the amount on your 2024 Form 1040, 1040-SR, or 1040-NR, line 15, would be less than zero if you could enter a negative amount on that line. Otherwise, you do not have any carryovers.

If you and your spouse once filed a joint return and are filing separate returns for 2025, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss.

If you excluded canceled debt from income in 2025, see Pub. 4681.

1. Enter the amount from your 2024 Form 1040, 1040-SR, or 1040-NR, line 15. If the amount would have been a loss and if you could enter a negative number on that line, enclose the amount in parentheses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.

2. Enter the loss from your 2024 Schedule D (Form 1040), line 21, as a positive amount . . . . . . . . . . . . . . 2.

3. Combine lines 1 and 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.

4. Enter the smaller of line 2 or line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.

If line 7 of your 2024 Schedule D is a loss, go to line 5; otherwise, enter -0- on line 5 and go to line 9. 5. Enter the loss from your 2024 Schedule D (Form 1040), line 7, as a positive amount . . . . . . . . . . . . . . . 5.

6. Enter any gain from your 2024 Schedule D (Form 1040), line 15. If a loss, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.

7. Add lines 4 and 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.

8. Short-term capital loss carryover to 2025. Subtract line 7 from line 5. If zero or less, enter -0-. If more than zero, also enter this amount on Schedule D, line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.

If line 15 of your 2024 Schedule D is a loss, go to line 9; otherwise, skip lines 9 through 13. 9. Enter the loss from your 2024 Schedule D (Form 1040), line 15, as a positive amount . . . . . . . . . . . . . . 9.

10. Enter any gain from your 2024 Schedule D (Form 1040), line 7. If a loss, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.

11. Subtract line 5 from line 4. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.

12. Add lines 10 and 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.

13. Long-term capital loss carryover for 2025. Subtract line 12 from line 9. If zero or less, enter -0-. If more than zero, also enter this amount on Schedule D, line 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.

yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you had incurred it in that next year. If part of the loss is still unused, you can carry it over to later years until it is completely used up.

When you figure the amount of any capital loss carryover to the next year, you must take the current year's allowable deduction into account, whether or not you claimed it and whether or not you filed a return for the current year.

When you carry over a loss, it remains long-term or short-term. A long-term capital loss you carry over to the next tax year will reduce that year's long-term capital gains before it reduces that year's short-term capital gains.

Figuring your carryover. The amount of your capital loss carryover is the amount of your total net loss that is more than the lesser of:

1. Your allowable capital loss deduction for the year, or

2. Your taxable income increased by your allowable capital loss deduction for the year.

If your deductions are more than your gross income for the tax year, use your negative taxable income in figuring the amount in (2) above.

Complete Worksheet 4-1 to determine the part of your capital loss that you can carry over.

Example. Bob and Shelly sold securities in 2025. The sales resulted in a capital loss of $7,000. They had no other capital transactions. Their taxable income was $26,000. On their joint 2025 return, they can deduct $3,000. The unused part of the loss, $4,000 ($7,000 − $3,000), can be carried over to 2026.

If their capital loss had been $2,000, their capital loss deduction would have been $2,000. They would have no carryover.

Use short-term losses first. When you figure your capital loss carryover, use your short-term capital losses first, even if you incurred them after a long-term capital loss. If you have not reached the limit on the capital loss deduction after using the short-term capital losses, use the long-term capital losses until you reach the limit.

102 Chapter 4 Sales and Trades of Investment Property Publication 550 (2025)

Decedent's capital loss. A capital loss sustained by a decedent during the decedent’s last tax year (or carried over to that year from an earlier year) can be deducted only on the final income tax return filed for the decedent. The capital loss limits discussed earlier still apply in this situation. The decedent's estate cannot deduct any of the loss or carry it over to following years.

Joint and separate returns. If you and your spouse once filed separate returns and are now filing a joint return, combine your separate capital loss carryovers. However, if you and your spouse once filed a joint return and are now filing separate returns, any capital loss carryover from the joint return can be deducted only on the return of the spouse who actually had the loss.

Capital Gain Tax Rates

The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. These lower rates are called the maximum capital gain rates.

The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss.

For 2025, the maximum capital gain rates are 0%, 15%, 20%, 25%, and 28%. See Table 4-4 for details.

Tip: If you figure your tax using the maximum capital gain rate and the regular tax computation results in a lower tax, the regular tax computation applies.

Example. All of your net capital gain is from selling collectibles, so the capital gain rate would be 28%. If you are otherwise subject to a rate lower than 28%, the 28% rate does not apply.

Investment interest deducted. If you claim a deduction for investment interest, you may have to reduce the amount of your net capital gain that is eligible for the capital gain tax rates. Reduce it by the amount of the net capital gain you choose to include in investment income when figuring the limit on your investment interest deduction. This is done on the Schedule D Tax Worksheet or the Qualified Dividends and Capital Gain Tax Worksheet. For more information about the limit on investment interest, see Interest Expenses in chapter 3.

28% rate gain. This gain includes gain or loss from the sale of collectibles and the eligible gain from the sale of qualified small business stock minus the section 1202 exclusion.

Collectibles gain or loss. This is gain or loss from the sale or trade of a work of art, rug, antique, metal (such as gold, silver, and platinum bullion), gem, stamp, coin, or alcoholic beverage held more than 1 year.

Table 4-4. What Is Your Maximum Capital Gain Rate?

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Collectibles gain includes gain from the sale of an interest in a partnership, S corporation, or trust due to unrealized appreciation of collectibles.

Gain on qualified small business stock. If you realized a gain from qualified small business stock that you held for more than 5 years, you can generally exclude some or all of your gain under section 1202. The eligible gain minus your section 1202 exclusion is a 28% rate gain. See Gains on Qualified Small Business Stock , ear- lier in this chapter.

Unrecaptured section 1250 gain. Generally, this is any part of your capital gain from selling section 1250 property (real property) that is due to depreciation (but not more than your net section 1231 gain), reduced by any net loss in the 28% group. Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D (Form 1040) instructions to figure your unrecaptured section 1250 gain. For more information about section 1250 property and section 1231 gain, see chapter 3 of Pub. 544.

Tax computation using maximum capital gain rates. Use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet (whichever applies) to figure your tax if you have qualified dividends or net capital gain. You have net capital gain if Schedule D (Form 1040), lines 15 and 16, are both gains.

Schedule D Tax Worksheet. Use the Schedule D Tax Worksheet in the Schedule D (Form 1040) instructions to figure your tax if:

• You have to file Schedule D (Form 1040); and

• Schedule D (Form 1040), line 18 (28% rate gain) or line 19 (unrecaptured section 1250 gain), is more than zero.

Qualified Dividends and Capital Gain Tax Work- sheet. If you do not have to use the Schedule D Tax Worksheet (as explained above) and any of the following apply, use the Qualified Dividends and Capital Gain Tax Worksheet in the Instructions for Form 1040 to figure your tax.

• You received qualified dividends. (See Qualified Divi- dends in chapter 1.)

• You do not have to file Schedule D (Form 1040) and you received capital gain distributions. (See Excep- tions to filing Form 8949 and Schedule D (Form 1040 ) , earlier.)

• Schedule D (Form 1040), lines 15 and 16, are both more than zero.

Alternative minimum tax. These capital gain rates are also used in figuring alternative minimum tax.

If your trading activities do not meet the above definition of a business, you are considered an investor, and not a trader. It does not matter whether you call yourself a trader or a “day trader.”

How To Report

Transactions from trading activities result in capital gains and losses (unless a section 475(f) election has been made) and must be reported on Form 8949 and Schedule D (Form 1040), as appropriate. Losses from these transactions are subject to the limit on capital losses explained earlier in this chapter.

Mark-to-market election made. If you made the section 475(f) mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). In that case, securities or commodities (depending upon which election was made) held at the end of the year in your business as a trader are marked-to-market by treating them as if they were sold for fair market value on the last business day of the year and gain or loss is recognized. But do not mark-to-market any securities or commodities you held for investment. Report sales from those securities or commodities on Form 8949 and Schedule D (Form 1040), as appropriate, not Form 4797. See the Instructions for Form 8949 and the Instructions for Schedule D (Form 1040).

Note: You may be a trader in some securities or commodities and have some securities or commodities that

Special rules apply if you are a trader in securities or commodities in the business of buying and selling securities or commodities for your own account. To be engaged in business as a trader in securities or commodities, you must meet all the following conditions.

• You must seek to profit from daily market movements in the prices of securities or commodities and not from dividends, interest, or capital appreciation.

• Your activity must be substantial.

• You must carry on the activity with continuity and regularity.

The following facts and circumstances should be considered in determining if your activity is a securities or commodities trading business.

• Typical holding periods for securities or commodities bought and sold.

• The frequency and dollar amount of your trades during the year.

• The extent to which you pursue the activity to produce income for a livelihood.

• The amount of time you devote to the activity.

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are not held in connection with your activities as a trader, such as those held for investment. The mark-to-market special rules discussed here do not apply to the securities or commodities held for investment. You must keep detailed records to distinguish those securities or commodities. The securities or commodities held for investment must be identified as such in your records on the day you acquired them (for example, by holding them in a separate brokerage account) specifically identified under section 475.

Expenses. Interest expense and other investment expenses that an investor would deduct on Schedule A (Form 1040) are deducted by a trader on Schedule C (Form 1040), Profit or Loss From Business, if the expenses are from the trading business. Commissions and other costs of acquiring or disposing of securities or commodities (depending upon which election was made) are not deductible but must be used to figure gain or loss. The limit on investment interest expense, which applies to investors, does not apply to interest paid or incurred in a trading business.

Self-employment tax. Gains and losses from selling securities or commodities as a trader are not subject to self-employment tax. This is true whether the election is made or not. For an exception that applies to section 1256 contracts, see Self-Employment Income, earlier.

How To Make the Mark-to-Market Election

To make the mark-to-market election for 2026, you must have filed an election statement no later than the due date for your 2025 return (without regard to extensions). The statement must be attached to that return or with a properly filed request for extension of time to file that 2025 return (Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return). The statement must have included the following information.

• That you are making an election under section 475(f) (1) or (f)(2) of the Internal Revenue Code.

• The first tax year for which the election is effective.

• The trade or business for which you are making the election.

If you’re a new taxpayer that wasn’t required to file a tax return for the prior year, you may make the election by placing the above statement in your books and records no later than 2 months and 15 days after the first day of the year for which you intend the election to become effective. You must attach a copy of the statement to your tax return for that year.

If your method of accounting for 2025 is inconsistent with the mark-to-market election, you must change your method of accounting for securities under Revenue Procedure 2025-23 (or its successor), available at IRS.gov/irb/ 2025-24_IRB#REV-PROC-2025-23 . Revenue Procedure 2025-23 requires you to file Form 3115, Application for Change in Accounting Method. Follow its instructions. Enter “64” on line 1a of the Form 3115.

If you made a mark-to-market election within 5 tax years of revoking a prior election, you can resume the mark-to-market election of the new election. To restart the mark-to-market election, you must file an election statement no later than the due date for your 2025 return (without regard to extensions) under Revenue Procedure 99-17, sections 5.03 and 5.04, and follow the non-automatic change procedures to request a change in method of accounting as described in Rev. Proc. 2015-13.

Once you make the election, it will apply to 2025 and all later tax years, unless you get permission from the IRS to revoke it. The effect of making the election is described under Mark-to-market election made, earlier.

If you want to revoke a prior mark-to-market election within the 5 tax years ending with the year of change for the election, you must follow the non-automatic change procedures in Revenue Procedure 2015-13 and Revenue Procedure 2025-23, section 24.02(9).

For more information on this election, see Revenue Procedure 99-17, on page 52 of Internal Revenue Bulletin 1999-7 at IRS.gov/pub/irs-irbs/irb99-07.pdf .

For information about method of accounting using the non-automatic change, see Revenue Procedure 2015-13 in Internal Revenue Bulletin 2015-5, available at IRS.gov/irb/2015-05_IRB#RP-2015-13 and Revenue Procedure 2024-23 in Internal Revenue Bulletin 2024-23, available at IRS.gov/irb/2025-24_IRB#REV- PROC-2025-23 .

If you have questions about a tax issue; need help preparing your tax return; or want to download free publications, forms, or instructions, go to IRS.gov to find resources that can help you right away.

Tax reform. Tax reform legislation impacting federal taxes, credits, and deductions was enacted in P.L. 119-21, commonly known as the One Big Beautiful Bill Act, on July 4, 2025. Go to IRS.gov/OBBB for more information and updates on how this legislation affects your taxes.

Preparing and filing your tax return. After receiving all your wage and earnings statements (Forms W-2, W-2G, 1099-R, 1099-MISC, 1099-NEC, etc.); unemployment compensation statements (by mail or in a digital format) or other government payment statements (Form 1099-G); and interest, dividend, and retirement statements from banks and investment firms (Forms 1099), you have several options to choose from to prepare and file your tax return. You can prepare the tax return yourself, see if you

Publication 550 (2025) Chapter 5 How To Get Tax Help 105

qualify for free tax preparation, or hire a tax professional to prepare your return.

Free options for tax preparation. Your options for preparing and filing your return online or in your local community, if you qualify, include the following.

• Free File. This program lets you prepare and file your federal individual income tax return for free using software or Free File Fillable Forms. However, state tax preparation may not be available through Free File. Go to IRS.gov/FreeFile to see if you qualify for free online federal tax preparation, e-filing, and direct deposit or payment options.

• VITA. The Volunteer Income Tax Assistance (VITA) program offers free tax help to people with low-to-moderate incomes, persons with disabilities, and limited-English-speaking taxpayers who need help preparing their own tax returns. Go to IRS.gov/ VITA, download the free IRS2Go app, or call

800-906-9887 for information on free tax return prepa- ration.

• TCE. The Tax Counseling for the Elderly (TCE) program offers free tax help for all taxpayers, particularly those who are 60 years of age and older. TCE volunteers specialize in answering questions about pensions and retirement-related issues unique to seniors. Go to IRS.gov/TCE or download the free IRS2Go app for information on free tax return preparation.

• MilTax. Members of the U.S. Armed Forces and qualified veterans may use MilTax, a free tax service offered by the Department of Defense through Military OneSource. For more information, go to MilitaryOneSource ( MilitaryOneSource.mil/MilTax ).

Also, the IRS offers Free Fillable Forms, which can be completed online and then e-filed regardless of income.

• IRS.gov/ITA : The Interactive Tax Assistant, a tool that

will ask you questions and, based on your input, pro- vide answers on a number of tax topics.

• IRS.gov/Forms : Find forms, instructions, and publications. You will find details on the most recent tax changes and interactive links to help you find answers to your questions.

• You may also be able to access tax information in your e-filing software.

Need someone to prepare your tax return? There are various types of tax return preparers, including enrolled agents, certified public accountants (CPAs), accountants, and many others who don’t have professional credentials. If you choose to have someone prepare your tax return, choose that preparer wisely. A paid tax preparer is:

• Primarily responsible for the overall substantive accuracy of your return,

• Required to sign the return, and

• Required to include their preparer tax identification number (PTIN).

Although the tax preparer always signs the return,

CAUTION information required for the preparer to accurately

prepare your return and for the accuracy of every item re- ported on the return. Anyone paid to prepare tax returns for others should have a thorough understanding of tax matters. For more information on how to choose a tax pre- parer, go to Tips for Choosing a Tax Preparer on IRS.gov.

Employers can register to use Business Services On- line. The Social Security Administration (SSA) offers online service at SSA.gov/employer for fast, free, and secure W-2 filing options to CPAs, accountants, enrolled agents, and individuals who process Form W-2, Wage and Tax Statement; and Form W-2c, Corrected Wage and Tax Statement.

Business tax account. If you are a sole proprietor, a partnership, an S corporation, a C corporation, or a single-member limited liability company (LLC), you can view your tax information on record with the IRS and do more with a business tax account. Go to IRS.gov/ BusinessAccount for more information.

IRS social media. Go to IRS.gov/SocialMedia to see the various social media tools the IRS uses to share the latest information on tax changes, scam alerts, initiatives, products, and services. At the IRS, privacy and security are our highest priority. We use these tools to share public information with you. Don’t post your social security number (SSN) or other confidential information on social media sites. Always protect your identity when using any social networking site.

The following IRS YouTube channels provide short, informative videos on various tax-related topics in English and ASL.

• Youtube.com/irsvideos .

Using online tools to help prepare your return. Go to IRS.gov/Tools for the following.

• The Earned Income Tax Credit Assistant ( IRS.gov/ EITCAssistant ) determines if you’re eligible for the

earned income credit (EITC).

• The Online EIN Application ( IRS.gov/EIN ) helps you get an employer identification number (EIN) at no cost.

• The Tax Withholding Estimator ( IRS.gov/W4App ) makes it easier for you to estimate the federal income tax you want your employer to withhold from your paycheck. This is tax withholding. See how your withholding affects your refund, take-home pay, or tax due.

• The Sales Tax Deduction Calculator ( IRS.gov/ SalesTax ) figures the amount you can claim if you

itemize deductions on Schedule A (Form 1040).

Getting answers to your tax questions. On IRS.gov, you can get up-to-date information on current events and changes in tax law.

• IRS.gov/Help : A variety of tools to help you get an-

swers to some of the most common tax questions.

106 Chapter 5 How To Get Tax Help Publication 550 (2025)

• Youtube.com/irsvideosASL .

Online tax information in other languages. You can find information on IRS.gov/MyLanguage if English isn’t your native language.

Over-the-Phone Interpreter (OPI) Service. The IRS offers the OPI Service to taxpayers needing language interpretation. The OPI Service is available at Taxpayer Assistance Centers (TACs), most IRS offices, and every VITA/TCE tax return site. This service is available in Spanish, Mandarin, Cantonese, Korean, Vietnamese, Russian, and Haitian Creole.

Accessibility Helpline available for taxpayers with disabilities. Taxpayers who need information about accessibility services can call 833-690-0598. The Accessibility Helpline can answer questions related to current and future accessibility products and services available in alternative media formats (for example, braille-ready, large print, audio, etc.). The Accessibility Helpline does not have access to your IRS account. For help with tax law, refunds, or account-related issues, go to IRS.gov/ LetUsHelp .

Alternative media preference. Form 9000, Alternative Media Preference, or Form 9000(SP) allows you to elect to receive certain types of written correspondence in the following formats.

• Standard Print.

• Large Print.

• Braille.

• Audio (MP3).

• Plain Text File (TXT).

• Braille-Ready File (BRF).

Disasters. Go to IRS.gov/DisasterRelief to review the available disaster tax relief.

Getting tax forms and publications. Go to IRS.gov/ Forms to view, download, or print all the forms, instructions, and publications you may need. Or you can go to IRS.gov/OrderForms to place an order.

Mobile-friendly forms. You’ll need an IRS Online Account (OLA) to complete mobile-friendly forms that require signatures. You’ll have the option to submit your form(s) online or download a copy for mailing. You’ll need scans of your documents to support your submission. Go to IRS.gov/MobileFriendlyForms for more information.

Getting tax publications and instructions in eBook format. Download and view most tax publications and instructions (including the Instructions for Form 1040) on mobile devices as eBooks at IRS.gov/eBooks .

IRS eBooks have been tested using Apple’s iBooks for iPad. Our eBooks haven’t been tested on other dedicated eBook readers, and eBook functionality may not operate as intended.

Access your online account (individual taxpayers only). Go to IRS.gov/Account to securely access information about your federal tax account.

• View the amount you owe and a breakdown by tax year.

• See payment plan details or apply for a new payment plan.

• Make a payment or view 5 years of payment history and any pending or scheduled payments.

• Access your tax records, including key data from your most recent tax return, and transcripts.

• View digital copies of select notices from the IRS.

• Approve or reject authorization requests from tax professionals.

Get a transcript of your return. With an online account, you can access a variety of information to help you during the filing season. You can get a transcript, review your most recently filed tax return, and get your adjusted gross income. Create or access your online account at IRS.gov/ Account .

Tax Pro Account. This tool lets your tax professional submit an authorization request to access your individual taxpayer IRS OLA. For more information, go to IRS.gov/ TaxProAccount .

Using direct deposit. The safest and easiest way to receive a tax refund is to e-file and choose direct deposit, which securely and electronically transfers your refund directly into your financial account. Direct deposit also avoids the possibility that your check could be lost, stolen, destroyed, or returned undeliverable to the IRS. Eight in 10 taxpayers use direct deposit to receive their refunds. If you don’t have a bank account, go to IRS.gov/ DirectDeposit for more information on where to find a bank or credit union that can open an account online.

Reporting and resolving your tax-related identity theft issues.

• Tax-related identity theft happens when someone steals your personal information to commit tax fraud. Your taxes can be affected if your SSN is used to file a fraudulent return or to claim a refund or credit.

• The IRS doesn’t initiate contact with taxpayers by email, text messages (including shortened links), telephone calls, or social media channels to request or verify personal or financial information. This includes requests for personal identification numbers (PINs), passwords, or similar information for credit cards, banks, or other financial accounts.

• Go to IRS.gov/IdentityTheft, the IRS Identity Theft Central webpage, for information on identity theft and data security protection for taxpayers, tax professionals, and businesses. If your SSN has been lost or stolen or you suspect you’re a victim of tax-related identity theft, you can learn what steps you should take.

Publication 550 (2025) Chapter 5 How To Get Tax Help 107

• Get an Identity Protection PIN (IP PIN). IP PINs are six-digit numbers assigned to taxpayers to help prevent the misuse of their SSNs on fraudulent federal income tax returns. When you have an IP PIN, it prevents someone else from filing a tax return with your SSN. To learn more, go to IRS.gov/IPPIN .

Ways to check on the status of your refund.

• Go to IRS.gov/Refunds .

• Download the official IRS2Go app to your mobile device to check your refund status.

• Call the automated refund hotline at 800-829-1954.

The IRS can’t issue refunds before mid-February

CAUTION child tax credit (ACTC). This applies to the entire

refund, not just the portion associated with these credits.

Making a tax payment. The IRS recommends paying electronically whenever possible. Options to pay electronically are included in the list below. Payments of U.S. tax must be remitted to the IRS in U.S. dollars. Digital assets are not accepted. Go to IRS.gov/Payments for information on how to make a payment using any of the following options.

• IRS Direct Pay : Pay taxes from your bank account. It’s

free and secure, and no sign-in is required. You can change or cancel within 2 days of scheduled payment.

• Debit Card, Credit Card, or Digital Wallet : Choose an

approved payment processor to pay online or by phone.

• Electronic Funds Withdrawal : Schedule a payment

when filing your federal taxes using tax return prepara- tion software or through a tax professional.

• Electronic Federal Tax Payment System : This is the

best option for businesses. Enrollment is required.

• Check or Money Order : Mail your payment to the ad-

dress listed on the notice or instructions.

• Cash : You may be able to pay your taxes with cash at

a participating retail store.

• Same-Day Wire : You may be able to do same-day

wire from your financial institution. Contact your finan- cial institution for availability, cost, and time frames.

Note: The IRS uses the latest encryption technology to ensure that the electronic payments you make online, by phone, or from a mobile device using the IRS2Go app are safe and secure. Paying electronically is quick and easy.

What if I can’t pay now? Go to IRS.gov/Payments for more information about your options.

• Apply for an online payment agreement ( IRS.gov/ OPA ) to meet your tax obligation in monthly installments if you can’t pay your taxes in full today. Once you complete the online process, you will receive immediate notification of whether your agreement has been approved.

• Use the Offer in Compromise Pre-Qualifier to see if you can settle your tax debt for less than the full amount you owe. For more information on the Offer in Compromise program, go to IRS.gov/OIC .

Filing an amended return. Go to IRS.gov/1040X for information and updates.

Checking the status of your amended return. Go to IRS.gov/WMAR to track the status of Form 1040-X amended returns.

CAUTION

It can take up to 3 weeks from the date you filed your amended return for it to show up in our sys- tem, and processing it can take up to 16 weeks.

Understanding an IRS notice or letter you’ve re- ceived. Go to IRS.gov/Notices to find additional information about responding to an IRS notice or letter.

IRS Document Upload Tool. You may be able to use the Document Upload Tool to respond digitally to eligible IRS notices and letters by securely uploading required documents online through IRS.gov. For more information, go to IRS.gov/DUT .

Schedule LEP. You can use Schedule LEP (Form 1040), Request for Change in Language Preference, to state a preference to receive notices, letters, or other written communications from the IRS in an alternative language. You may not immediately receive written communications in the requested language. The IRS’s commitment to LEP taxpayers is part of a multi-year timeline that began providing translations in 2023. You will continue to receive communications, including notices and letters, in English until they are translated to your preferred language.

Contacting your local TAC. Keep in mind, many questions can be answered on IRS.gov without visiting a TAC. Go to IRS.gov/LetUsHelp for the topics people ask about most. If you still need help, TACs provide tax help when a tax issue can’t be handled online or by phone. All TACs now provide service by appointment, so you’ll know in advance that you can get the service you need without long wait times. Before you visit, go to IRS.gov/TAC to find the nearest TAC and to check hours, available services, and appointment options. Or, on the IRS2Go app, under the Stay Connected tab, choose the Contact Us option and click on “Local Offices.”

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Below is a message to you from the Taxpayer Advocate Service, an independent organization established by Congress.

108 Chapter 5 How To Get Tax Help Publication 550 (2025)

What Is the Taxpayer Advocate Service?

The Taxpayer Advocate Service (TAS) is an independent organization within the Internal Revenue Service (IRS). TAS helps taxpayers resolve problems with the IRS, makes administrative and legislative recommendations to prevent or correct the problems, and protects taxpayer rights. We work to ensure that every taxpayer is treated fairly and that you know and understand your rights under the Taxpayer Bill of Rights. We are Your Voice at the IRS.

How Can TAS Help Me?

TAS can help you resolve problems that you haven’t been able to resolve with the IRS on your own. Always try to resolve your problem with the IRS first, but if you can’t, then come to TAS. Our services are free .

• TAS helps all taxpayers (and their representatives), including individuals, businesses, and exempt organizations. You may be eligible for TAS help if your IRS problem is causing financial difficulty, if you’ve tried and been unable to resolve your issue with the IRS, or if you believe an IRS system, process, or procedure just isn’t working as it should.

• To get help any time with general tax topics, visit www.TaxpayerAdvocate.IRS.gov . The site can help

you with common tax issues and situations, such as what to do if you make a mistake on your return or if you get a notice from the IRS.

• TAS works to resolve large-scale (systemic) problems that affect many taxpayers. You can report systemic issues at www.IRS.gov/SAMS . (Be sure not to include any personal identifiable information.)

How Do I Contact TAS?

TAS has offices in every state, the District of Columbia, and Puerto Rico. To find your local advocate’s number:

• Go to www.TaxpayerAdvocate.IRS.gov/Contact-Us ,

• Check your local directory, or

• Call TAS toll free at 877-777-4778.

What Are My Rights as a Taxpayer?

The Taxpayer Bill of Rights describes ten basic rights that all taxpayers have when dealing with the IRS. Go to www.TaxpayerAdvocate.IRS.gov/Taxpayer-Rights for more information about the rights, what they mean to you, and how they apply to specific situations you may encounter with the IRS. TAS strives to protect taxpayer rights and ensure the IRS is administering the tax law in a fair and equitable way.

Publication 550 (2025) Chapter 5 How To Get Tax Help 109

Accrual method: An accounting method under which you report your income when you earn it, whether or not you have received it. You generally deduct your expenses when you incur a liability for them, rather than when you pay them.

At-risk rules: Rules that limit the amount of loss you may deduct to the amount you risk losing in the activity.

Basis: Basis is the amount of your investment in property for tax purposes. The basis of property you buy is usually the cost. Basis is used to figure gain or loss on the sale or disposition of investment property.

Below-market loan: A demand loan (defined later) on which interest is payable at a rate below the applicable federal rate, or a term loan where the amount loaned is more than the present value of all payments due under the loan.

Call: An option that entitles the purchaser to buy, at any time before a specified future date, property such as a stated number of shares of stock at a specified price.

Cash method: An accounting method under which you report your income in the year in which you actually or constructively receive it. You generally deduct your expenses in the year you pay them.

Commodities trader: A person who is actively engaged in trading section 1256 contracts and is registered with a domestic board of trade designated as a contract market by the Commodities Futures Trading Commission.

Commodity future: A contract made on a commodity exchange, calling for the sale or purchase of a fixed amount of a commodity at a future date for a fixed price.

Covered security: Covered securities are certain securities subject to added reporting by your broker on any Form 1099-B you may receive. See the

Instructions for Form 1099-B for more details.

Conversion transaction: Any transaction that you entered into after April 30, 1993, that meets both of these tests.

1. Substantially all of your expected return from the transaction is due to the time value of your net investment.

2. The transaction is one of the following.

a. A straddle, including any set of

offsetting positions on stock.

b. Any transaction in which you

acquire property (whether or not actively traded) at substantially the same time that you contract to sell the same property or substantially identical property at a price set in the contract.

c. Any other transaction that is

marketed or sold as producing capital gains from a transaction described in (1).

Demand loan: A loan payable in full at any time upon demand by the lender.

Dividend: A distribution of money or other property made by a corporation to its shareholders out of its earnings and profits.

Equity option: Any option:

• To buy or sell stock, or

• That is valued directly or indirectly by reference to any stock or narrow-based security index.

Fair market value: The price at which property would change hands between a willing buyer and a willing seller, both having reasonable knowledge of the relevant facts.

Forgone interest: The amount of interest that would be payable for any period if interest accrued at the applicable federal rate and was payable annually on December 31, minus any interest payable on the loan for that period.

Forward contract: A contract to deliver a substantially fixed amount of property (including cash) for a substantially fixed price.

Futures contract: An exchange-traded contract to buy or sell a specified commodity or financial instrument at a specified price at a specified future date. See also Commodity future .

Gift loan: Any below-market loan where the forgone interest is in the nature of a gift.

Interest: Compensation for the use or forbearance of money.

Investment interest: The interest you paid or accrued on money you borrowed that is allocable to property held for investment.

Limited partner: A partner whose participation in partnership activities is restricted, and whose personal liability for partnership debts is limited to the amount of money or other property that they contributed or may have to contribute.

Listed option: Any option (other than a right to acquire stock from the issuer) that is traded on (or subject to the rules of) a qualified board or exchange.

Mark-to-market rule: The treatment of each section 1256 contract (defined later) held by a taxpayer at the close of the year as if it were sold for its fair market value on the last business day of the year.

Market discount: The stated redemption price of a bond at maturity minus your basis in the bond immediately after you acquire it. Market discount arises when the value of a debt obligation decreases after its issue date.

Market discount bond: Any bond having market discount except:

• Short-term obligations with fixed maturity dates of up to 1 year from the date of issue,

• Tax-exempt obligations that you bought before May 1, 1993,

110 Publication 550 (2025)

• U.S. savings bonds, and

• Certain installment obligations.

Mutual fund: A mutual fund is a regulated investment company generally created by “pooling” funds of investors to allow them to take advantage of diversity of investments and professional management.

Nominee: A person who receives, in their name, income that actually belongs to someone else.

Noncovered security: Noncovered securities are securities that are not subject to added reporting by your broker on any Form 1099-B you may receive. See the Instructions for Form 1099-B for more details.

Nonequity option: Any listed option that is not an equity option, such as debt options, commodity futures options, currency options, and broad-based stock index options.

Options dealer: Any person registered with an appropriate national securities exchange as a market maker or specialist in listed options.

Original issue discount (OID): The amount by which the stated redemption price at maturity of a debt instrument is more than its issue price.

Passive activity: An activity involving the conduct of a trade or business in which you do not materially participate and any rental activity. However, the rental of real estate is not a passive activity if both of the following are true.

• More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate.

• You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate.

Portfolio income: Gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. It includes gains from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment.

Premium: The amount by which your cost or other basis in a bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest).

Private activity bond: A bond that is part of a state or local government bond issue of which:

1. More than 10% of the proceeds are to be used for a private business use, and

2. More than 10% of the payment of the principal or interest is:

a. Secured by an interest in prop erty to be used for a private business use (or payments for the property), or

b. Derived from payments for

property (or borrowed money) used for a private business use.

Put: An option that entitles the purchaser to sell, at any time before a specified future date, property such as a stated number of shares of stock at a specified price.

Real estate mortgage investment conduit (REMIC): An entity that is formed for the purpose of holding a fixed pool of mortgages secured by interests in real property, with multiple classes of interests held by investors. These interests may be either regular or residual.

Regulated futures contract: A section 1256 contract that:

• Provides that amounts that must be deposited to, or may be withdrawn from, your margin account depend on daily market conditions (a system of marking to market); and

• Is traded on, or subject to the rules of, a qualified board of exchange, such as a domestic board of trade designated as a contract market by the Commodity Futures Trading Commission or any board of trade or exchange approved by the Secretary of the Treasury.

Restricted stock: Stock you get for services you perform that is nontransferable and is subject to a substantial risk of forfeiture.

Section 1256 contract: Any:

• Regulated futures contract,

• Foreign currency contract as defined in chapter 4 under Foreign currency contract ,

• Nonequity option,

• Dealer equity option, or

• Dealer securities futures contract.

A section 1256 contract does not include certain swaps as listed in Excep- tions under Section 1256 Contracts Marked to Market in chapter 4.

Securities futures contract: A contract of sale for future delivery of a single security or of a narrow-based security index.

Short sale: The sale of property that you generally do not own. You borrow the property to deliver to a buyer and, at a later date, you buy substantially identical property and deliver it to the lender.

Straddle: Generally, a set of offsetting positions on personal property. A straddle may consist of a purchased option to buy and a purchased option to sell on the same number of shares of the security, with the same exercise price and period.

Stripped preferred stock: Stock that meets the following tests.

1. There has been a separation in ownership between the stock and any dividend on the stock that has not become payable.

2. The stock:

a. Is limited and preferred as to

dividends,

b. Does not participate in corpo rate growth to any significant extent, and

c. Has a fixed redemption price.

Term loan: Any loan that is not a demand loan.

Wash sale: A sale of stock or securities at a loss within 30 days before or

Publication 550 (2025) 111

after you buy or acquire in a fully taxable trade, or acquire a contract or option to buy, substantially identical stock or securities.

112 Publication 550 (2025)

To help us develop a more useful index, please let us know if you have ideas for index entries. Index See “Comments and Suggestions” in the “Introduction” for the ways you can reach us.

Custodian account for 4 Gifts to 6 Investment income of 4, 47 Qualified dividends 48 Savings account with parent as

A Abusive tax shelters ( See Tax

shelters) Accrual method 10, 24, 35, 46, 110 Accuracy-related penalty 6 Acquisition discount 23, 66 Adjusted basis 30, 61, 62, 65 Alaska Permanent Fund

trustee 6 U.S. savings bond owner 12 Co-owners of U.S. savings

dividends 33, 48 Amortization of bond premium 48 Annuities :

Borrowing on 50 Interest on 8 Life insurance proceeds used to

buy 16 Sale of 78 Single-premium 50 Trade for 54, 72 Applicable federal rate 9 Appreciated financial positions 55 Arbitrage bonds 17 Assistance ( See Tax help) At-risk rules 45, 100, 110 Automatic investment service 63,

C Calls and puts 89, 110

Convertible 71 Coupon 24 Enterprise zone facility 18 Federally guaranteed 17 Identification 62 Market discount 18, 46, 65, 77,

100, 110 New York Liberty bonds 18 Par value 66 Premiums on 49, 65, 111 Private activity 17, 111 Redemption or retirement of 54 Sold between interest dates 16 State and local government 76 Stripped 17, 20, 66 Tax credit bonds 17 Tax-exempt 76 Traded flat 8 U.S. savings ( See U.S. savings

bonds 11 Collateralized debt obligations

(CDOs) 36 Collectibles 103 Commissions 63 Commodities traders 110 Commodity futures 79, 83, 110 Community property :

U.S. savings bonds 11 Constructive ownership

bonds) U.S. Treasury ( See U.S. Treasury

transactions 74, 79 Constructive receipt 24 Constructive sales 55 Contractors, insolvency of 84 Conversion transactions 78, 110 Convertible stocks and bonds 71 Cooperatives, sales of stock to 96 Corporate distributions 27

bills, notes, and bonds) Brokerage fees 101

82 Average basis 67

Double-category method 67 Illustrated 68

Table 4-3 90 Capital assets 75 Capital gain distributions 30, 34,

B Backup withholding 5 Bad debts 78, 83 Bankrupt financial institutions :

48, 83 Capital gains and losses 74-83

transactions 79 Definition 75 Empowerment zone assets 99 Investment property 75 Long-term 85, 101 Losses, limit on 101 Passive activities 100 Qualified covered call options 92 Qualified small business stock 97 Reporting requirements 92, 98 Short-term 85, 101 Tax rates 103

Constructive ownership

Capital gain 34, 48, 83 Constructive 31 Dividends ( See Dividends) Fractional shares 32 Liquidating 31 Nondividend 30, 34 Return of capital 30 Stock rights 31 Undistributed capital gains 30 Corporate reorganizations 70 Cost basis 59, 67 Coupon bonds 24 Covered security, defined 110

D Day traders 104 Dealer equity options 57 Dealer securities futures

contracts 57 Debt instruments, retirement of 77 Decedents 61, 103

Deposit in 77 Bargain purchases 60 Basis 59, 72, 110

Adjusted 30, 61, 62, 65 Average 67 Cost 59, 67 Inherited property 61 Investment property 59 Like-kind exchanges 70 Other than cost 59 REITs 62 REMIC, residual interest 36 Replacement stock 98 Shares acquired by

Table 4-4 103 Capital loss carryover 93, 101

of 13 Demand loans 110 Demutualization 72 Deposits, loss on 77 Discount on debt instruments 18

U.S. savings bond interest, reporting

reinvestment 63 Stocks and bonds 30, 32, 49, 62 Bearer obligations 20, 77 Below-market loans 9, 110 Bonds :

Worksheet 4-1 102 Cash method 10, 23, 46, 110

obligations) 36 Certificates of deposit (CDs) 20 Children :

Reporting options for savings bond

Certificates of deposit 20 Election to report all interest as

OID 23 Face-amount certificates 20 Gain or loss treatment 76 Inflation-indexed 20

Accrued interest on 27 Amortization of premium 48 Arbitrage 17 Basis 49, 62 Capital asset 75

interest 11 Cash-settled options 56 Casualty losses 78 CDOs (Collateralized debt

dividends 48 Capital gain distributions 48

Alaska Permanent Fund

Publication 550 (2025) 113

Market discount bonds ( See Market

Fair market value 59, 60, 66 Federal guarantee on bonds 17 Financial asset securitization

discount bonds) Original issue discount

( See Original issue discount (OID)) Short-term obligations 22, 76 Stripped bonds and coupons 20 Discounted debt instruments 18 Discounted tax-exempt

investment trusts (FASITs) 36 First-in first-out (FIFO) 67 Foreign currency transactions 56 Foreign income 2 Forgone interest 110 Form 1040 or 1040-SR,

Long-term gains and losses 101 Mark-to-market election 104 Market discount bonds 77, 100 Musical compositions 76 Nominees 101 Nonbusiness bad debt 78 Nondividend distributions 34 Option 88 Property bought at various

times 101 Rollover, qualified small business

obligations 66 Dividends 27, 110

( See also Form 109 9-DIV)

Alaska Permanent Fund 33, 48 Exempt-interest 7, 32, 83 Extraordinary 86 Holding period 28 Insurance policies 32 Money market funds 30 Nominees 28, 34 Ordinary 28 Patronage 33 Payments in lieu of 86 Qualified 28, 33, 48 Qualified foreign corporation 29 Received in January 28 Reinvestment of 83 Reinvestment plans 30, 63 Reporting requirements 27, 33, 34 Restricted stock 33 Sale or trade vs. 54 Scrip 32 Sold stock 28 Stock 63, 82 Underreported 5 Veterans' insurance 7, 33 Divorce 60, 72

Schedule B 24 Form 1040 or Form 1040-SR 33 Form 1040-X 55 Form 1040, Schedule D 99 Form 1041 38 Form 1065 38

G Gains on qualified small business

stock 97 Gains on sales or trades 66, 73, 74

( See also Capital gains an d losse s ) Gifts 6, 60, 82, 110 Gifts of shares 69 Glossary 110 Government obligations 23

Schedule K-1 38 Form 1066, Schedule Q 36, 51 Form 1096 27, 34, 101 Form 1099-B 52, 100, 101

Covered security, defined 110 Noncovered security, defined 111 Form 1099-CAP 100 Form 1099-DIV 4, 27, 33, 34 Form 1099-INT 4, 7, 14, 24, 27, 35,

stock 98 Sale expenses 101 Short-term gains and losses 101 Software 62 Worthless securities 55 Form SS-4 37 Form W-8BEN 5 Form W-9 5 Forward contracts 110 Fractional shares 32, 82 Frozen deposits 8, 26 Futures contracts :

Definition 110 Regulated 56, 111 Securities 83, 87, 88 Futures, commodity 79, 83, 110

Wash sales 87

E Education Savings Bond

Program 14 Interest excluded under 26 Employee stock options 2 Employee stock ownership plans

36 Form 1099-MISC 28, 86 Form 1099-OID 7, 19, 25, 35, 36 Form 1099-S 100, 101 Form 1120 38 Form 2439 30 Form 3115 11, 50, 105 Form 4684 78 Form 4797 70, 80, 81 Form 4952 48 Form 6198 100 Form 6781 58, 79, 92, 100 Form 8275 42 Form 8275-R 42 Form 8582 37 Form 8615 4 Form 8815 14, 26 Form 8824 70 Form 8832 37 Form 8886 41, 42 Form 8949 :

H Hedging transactions 57, 58, 79 Holding period :

(ESOPs), sales of stock to 96 Employer identification numbers

(EINs) 37 Empowerment zone 99 Endowment contracts 50 Enterprise zone facility bonds 18 Equity option 57, 110 Estate income received by

Bad debts 85 Basis adjustment 30 Capital Gains 99 Capital Losses 99 Cooperative, sale to certain 96 Copyrights in musical works 76 Employee stock ownership plan,

U.S. 2 Income tax treaties (Table 1-3s) 29 Indian tribal government 16 Individual retirement arrangements

Investment property 81 Replacement stock 98 Shares acquired by

reinvestment 83 Straddles 94

I Income from sources outside

beneficiary 4 Exchanges of mutual fund

Basis 61 Holding period 82 Transfer by inheritance 54

shares 72 Exclusion of gain :

DC zone assets 99 Exempt-interest dividends on

sale to 96 Empowerment Zone Assets 99 Exempt-interest dividends 83 Form 1099-B 52, 100 Form 1099-CAP 100 Form 1099-S 101 Fractional shares 32 Gain, qualified small business

(IRAs) : Interest income 7 Inflation-indexed debt

mutual fund stock 83

F Face-amount certificates 20 Fair market 110

stock 98 How to fill in, generally 99

instruments 20, 21 Inherited property :

114 Publication 550 (2025)

Insolvency of contractors 84 Installment sales 100 Insurance :

General information 4 Net income 47 Recordkeeping 4 Reporting of (Table 1-1) 6 Investment interest expenses :

Accrued market discount 22 Maximum rate of capital gains

Borrowing on 50 Dividends, interest on 8, 32 Interest option on 16 Life insurance companies,

demutualization 72 Life, paid to beneficiary 16 Prepaid premiums 8 Single-premium life 50 Trades 72 Veterans' dividends, interest on 7,

Reporting requirements 51 Investment property 45

Basis 59 Definition 52 Gain or loss treatment 75 Gift, received as 60 Holding period 81 Liquidation, received in 65 Nontaxable trades, received in 60 Sales and trades 52 Services, received for 59 Spouse, received from 60 Taxable trades, received in 60

Revenue bonds 17 Secondary liability on home 84 Seller-financed 26 Municipal bonds 16, 24, 76

( See also State or local gove rnment

(Table 4-4) 103 Mechanics' and suppliers' liens 84 Missing children, photographs of 2 Mixed straddles 86, 94 Money market funds 30

Interest income 7 Mortgages :

33 Interest expenses :

Allocation of 46 Investment interest 45, 110

obligations) Mutual fund, defined 111 Mutual funds 30, 45, 47, 51, 62, 67,

Limit on 46, 47 When to deduct 46 Margin accounts 46 Paid in advance 46 Straddles 51 Interest income 6

J Joint accounts 5 Joint and separate returns 44, 103

N Net Investment Income Tax 4 New York Liberty bonds 18 NIIT 4 Nominee distributions :

83 Individual retirement arrangements

(IRAs) 2 publicly offered 51

Annuity contracts 8 Bonds traded flat 8 Certificates of deposits 7 Condemnation awards 8 Deferred interest accounts 7 Dividends on deposit or share

L Life insurance companies :

demutualization 72 Like-kind exchanges 70, 73

Dividends 28, 34 Interest income 7, 11, 14, 27 Original issue discount 19 Nominee, defined 111 Nonbusiness bad debts 78, 83 Noncapital assets 75 Noncovered security, defined 111 Nondeductible investment

accounts 7 Frozen deposits 8, 26 Gift for opening account 8 Individual retirement arrangements

(IRAs) 7 Installment sale payments 8 Insurance dividends 8 Money market funds 7 Nominee distributions 7, 11, 14, 27 Prepaid insurance premiums 8 Reporting 23-27 Reporting requirements 24 Seller-financed mortgage 26 Tax refunds 8 Tax-exempt 16, 24 Taxable 7, 8, 15, 17 U.S. savings bonds, person

Basis of property received 70 Reporting requirements 70 Limited partners 110 Liquidating distributions 31, 65 Listed options 56, 110 Load charges 63 Loans

Amount calculation 66 Carryback election 57, 58 Mutual fund or REIT stock held 6

Below-market 9, 110 Gift and demand 9, 110 Guarantees 84 Term 9, 111 Local government obligations

( See State or local government obligations) Long-term capital gains and

expenses 50 Nondividend distributions 30 Nonequity options 56, 111 Nonqualified preferred stock 71 Nonresident aliens :

losses 85, 101 Losses on sales or trades 74

( See also Capital gains and l oss es)

Backup withholding 5 Nontaxable return of capital 30 Nontaxable stock rights 82 Nontaxable trades 70, 82 Notes :

Individuals, bought at discount 77 U.S. Treasury ( See U.S. Treasury

responsible for tax (Table 1-2) 12 Underreported 5 Unstated 59 Usurious interest 8 VA insurance dividends 7 Investment clubs 37, 38 Investment expenses 44

stock 80 Small business investment

bills, notes, and bonds)

months or less 83 Passive activities 37, 38, 45, 48 Related parties 73 Section 1244 (small business)

Allocated 35 At-risk rules 45 Interest 103 Limits on deductions 44 Nondeductible 50 nonpublicly offered mutual fund or

M Mark-to-market election 104 Mark-to-market rule 57, 110 Market discount bonds 18, 21, 22,

46, 65, 77, 100, 110

company stock 81 Wash sales 93

O Options 88

Calls and puts 89, 110 Cash settlement 56, 88 Dealer equity 57 Deep-in-the-money 92 Employee stock 2 Equity 57, 110 Gain or loss 88, 92 Holding period 82 Listed 56, 110 Nonequity 56, 111 Qualified covered call 92

REMIC 51 Investment income 3

Children 4, 47

Publication 550 (2025) 115

Reporting requirements 88 Section 1256 contracts 56, 88 Wash sales 87 Options dealer 111 Ordinary gains and losses 75, 78 Original issue discount :

Redemption or retirement of

bonds 54 Regulated futures contract 56, 111 Reinvestment rights 63 REITs ( See Real estate investment

trusts (REITs)) Related party transactions 52, 73,

Rollover of gain from sale 98 Traders in 104 Worthless 54, 84 Securities futures 111 Securities futures contracts 57, 83,

88 Self-employment income 59 Self-employment tax 105 Seller-financed mortgages 26 Short sales 85, 86

Nominee distributions 19 Original issue discount

(OID) 17-21, 66, 111 Adjustment to 27 Reporting requirements 19 Rules 20

74 Related persons 91 REMICs ( See Real estate mortgage

investment conduits (REMICs)) Reorganizations, corporate 70 Reporting requirements :

losses 85, 101 Short-term obligations 22, 23, 66,

Adjusted basis 65 Defined 111 Expenses of 50 Extraordinary dividends 86 Puts 89 Small business investment

P Pass-through entities :

Rollover of gain 98 Passive activities 111

Gains and losses 37, 38, 45, 48,

Bad debts 85 Bond premium amortization 50 Capital gains and losses 92, 98, 99 Dividend income 33 Interest income 24 Interest on U.S. savings bonds 11,

company stock 81 Short-term capital gains and

100 Patronage dividends 33 Penalties :

company stock 81, 98 Reporting requirements 81 Small business stock 65, 80, 83, 97 Social security number (SSN) :

Accuracy-related 6, 42 Backup withholding 5 Civil fraud 44 Early withdrawal 7, 27 Failure to pay tax 44 Failure to supply SSN 5 Substantial understatement 42

12 Investment interest expenses 51 Like-kind exchanges 70 Options 88 Original issue discount 19 S corporation income, deductions,

76 Interest deduction, limit on 47 Sixty/forty (60/40) rule 57 Small business investment

and credits 37 Section 1256 contracts 58 State or local government

Custodial accounts 4 Joint accounts 4 Requirement to give 4 Specialized small business

obligations 16-18 Market discount bonds ( See Market

Section 199A deduction 42 Valuation misstatement 42 Political parties :

Debts owed by 84 Portfolio income 111 Preferred stock :

investment company stock 98 Spouses :

Nonqualified 71 Redeemable at a premium 31 Stripped 34, 111 Premiums on bonds 49, 65, 111 Private activity bonds 17, 111 Public utility stock reinvestment 63 Publications ( See Tax help) Puts and calls 89, 111

obligations 17 Straddles 100 Substitute payments 86 Tax-exempt interest income 24 Trades 104 Repossession of real property 82 Restricted property 60 Restricted stock 33, 111 Retirement of debt instrument 77 Return of capital ( See Nondividend

Transfers between 60, 72, 73

( See also Related par t y

distributions) Rollover of gain from sale :

transactions) State or local government

Securities 98

Table 4-3 90

Q Qualified dividends 33 Qualified small business stock 65,

83, 97 Gains on 97

S S corporations 37, 65 Sales and trades of investment

bonds) SBIC stock ( See Small business

investment company stock) Scrip dividends 32 Section 1202 gain 98, 104 Section 1244 stock 80 Section 1250 gain 104 Section 1256 contracts 56, 82, 88,

property 52 Definition 53 Savings bonds ( See U.S. savings

discount bonds) Private activity bonds 17, 111 Registration requirement 16 Tax-exempt interest 16 Taxable interest 17 Stock :

Basis 30, 32, 62, 98 Capital asset 75 Constructive ownership 74 Convertible 71 Corporate 70 Dividends ( See Dividends) Fractional shares 32, 82 Identification 62 Installment sales 100 Nonqualified preferred stock 71 Options for employees 2 Public utility, reinvestment 63 Redemption of 54 Replacement stock 98 Restricted stock 33, 111 Rights 31, 64, 82

R Real estate investment trusts

(REITs) 30, 62, 83 Real estate mortgage investment

conduits (REMICs) 35, 51, 111 Regular interest 35 Residual interest 36, 88 Recordkeeping requirements :

100, 111 Net gain on 58 Net loss on 57 Reporting requirements 58 Securities :

Investment income 4 Small business stock 81 Redemption of stock 54

Holding period 81 Installment sales 100

116 Publication 550 (2025)

S corporations 65 Sales to ESOPs or cooperatives 96 Small business 65, 83 Splits 64 Straddles ( See Straddles) Stripped preferred stock 34, 111 Surrender of 54 Trades 71 Trust instruments treated as 56 Straddles 90-96

Tax rates :

Penalties 42 Reporting requirements 41 Rules to curb abuse 39 Tax-exempt bonds 76 Tax-exempt income :

Expenses of 50 Interest 16, 24 Tax-exempt obligations 21, 66 Taxable income, expenses of 50 Taxes :

Capital gain and losses 103 Tax refunds :

Treasury inflation-protected

securities (TIPS) 16, 20 Treaties, income tax (Table 1-3) 29 Trust income received by

Interest on 8 Tax shelters 38-44

beneficiary 4

U U.S. savings bonds 8, 10

Defined 111 Holding period 94 Interest expense and carrying

(Table 1-2) 12 U.S. Treasury bills, notes, and

bonds 8, 15, 72, 82 Undistributed capital gains 34 Usurious interest 8

Reporting interest on 8, 10 Retirement or profit-sharing plan,

distributed from 13 Worksheet 26 Tax, responsible person

charges 51 Loss deferral rules 91 Mixed 86, 94 Reporting requirements 100 Stripped bonds and coupons 17,

State income 51 Term loans 9, 111 Trade or business 45 Traders in securities 104 Trades :

20, 66 Stripped preferred stock 34, 111 Substitute payments 86

V Veterans' insurance :

Dividends on 33

T Tables :

Capital gains maximum rate

(Table 4-4) 103 Income tax treaties (Table 1-3) 29 Investment income, reporting of

Insurance 72 Investment property 52 Like-kind 70, 73 Nontaxable 60, 70, 82 Reporting requirements 104 Stock 71 Taxable 60 U.S. Treasury notes or bonds 72 Treasury bills, notes, and bonds

W Warrants 87 Wash sales 86-88, 111

(Table 1-1) 6 Puts and calls (Table 4-3) 90 U.S. savings bonds, person

Holding period 83 Loss deferral rules, straddles 93 Withholding, backup 5 Worksheets :

responsible for tax (Table 1-2) 12 Tax credit bonds 17 Tax help 105

( See U.S. Treasury bills, notes, and bonds) Treasury inflation-indexed

securities 20

Capital loss carryover 102 Worthless securities 54, 84

Publication 550 (2025) 117