Tax law distinguishes between (a) ordinary income and deductions, and (b) capital gains and losses. With certain exceptions, capital gain or loss arises when a capital asset is sold to another party, or exchanged for another asset. If an asset is acquired or lost without a sale or exchange, then the income is considered ordinary.
NOTE: Lukka does not provides tax advice. The statements above are general in nature and do not address how the application of the tax rules can vary based on a taxpayer’s actual facts. Please consult a tax professional on how the tax rules apply to your specific facts.