Don't Neglect to Elect, Part 2

In the hustle and bustle of tax season, practitioners may overlook some of the elective tax benefits available to clients. Although many elections can be made under extension or on amended returns, a little forethought can go a long way. Installment sales of capital gain property generally require taxpayers to recognize gain as cash is received from the buyer. Usually, this method is advantageous for taxpayers, but not always. The election under IRC Section 453(d)(1) is made by simply reporting the full capital gain on a timely filed tax return for the year of the sale. Individuals can contribute appreciated capital gain property to 50% charities and obtain a deduction for its fair market value. Where losses and other deductions exceed the limit of an S corporation shareholder's adjusted basis, an election can be made to alter the application of the ordering rules under Treas. Reg. Section 1.1367-1.