A capital loss is a reduction in the value of any company’s capital: this includes a reduction in the investments or even the capital assets. The company incurs losses when the capital assets are sold at a cheaper price than the initial buying price. The current treatment of capital losses tends to discourage an individual investor from purchasing a high-risk stock. The capital loss limit is forced to investors as the stock owners decide when to get the gains and the losses. This tends to discourage individuals because it reduces their taxes by getting losses. At the same time, their assets that have profits are not involved, which means they cannot count on making any profits after investing in the startup company (Wendling, 2019).
Suppose the individual does not have the capital gains. There is only a small percentage of the capital losses that are deducted annually ($3,000), which seems to take many years before an investor with big capital loss is allowed to pay all the losses. Capital losses must be offset against the capital gains, and they are subjected to the restrictions put on the durability. This means that a company must use its profits to cover the losses they get when they offset their assets.
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The capital losses are deducted when the investments meet the required standards, and high risk and startup companies don’t seem to meet the standard. This is a great way that the investors become discouraged, and they give up on investing. When the capital loss limit is increased, they tend to favor the high-income earners who tend to hold up the stock. This is the most significant way to discourage individuals from investing. The increase would also reduce the stock market values.
The Tax Cut Jobs Act to the current law, the Tax Cuts and Jobs Act tend to reduce the statutory tax rate in all taxable income and changed some income tax brackets. In the previous tax law, the tax brackets were listed for inflation using a different recording. The Tax Cuts and Job Act gives tax cuts to the low and middle-income earners families and give the businesses a chance to be more competitive the previous law never gave them the cut but favored he rich. With the previous law, a business could deduct up to 50% of entertainment expenses related to the business, but the Tax Cut and Jobs Act eliminated all the deductions related to entertainment.
The changes tend to influence personal investment decisions. When it comes to acquiring a used property in real estate transactions, there is a 100% depreciation of the value, which means that one can purchase the property at an affordable price. The Tax Cut and Jobs Act is the best tax change that has ever happened as it gives economic benefits to individuals and businesses as it gives them the ability to shield capital gains.
Reference
Pope, T. R., Brandy, D., Ford, A., Fowler, A. C., Joseph, R. J., Hulse, D. S., . . . Schadewald, M. S. (2019). Pearson's Federal Taxation 2019 (32 ed.).
