Determining appropriate tax rate based on nature of capital gains
Not all capital gains are taxed at the same rate. Four separate tax rates are available for capital gains. The rate applicable to a particular gain depends on both the total income of the taxpayer and the nature of the capital gain.[5]
The 5% Rate for Adjusted Net Capital Gain of Lower-Income Taxpayers:
A taxpayer with an income of $31,850 (currently the margin of the 15% tax bracket) or less (including amount of capital gain) will see his capital gains taxed at a 5% rate.[6]
The 15% Rate for Remaining Adjusted Net Capital Gain:
Once the total income of the taxpayer exceeds $31,850 (the margin of the 15% tax bracket), the portion of capital gains that make up the excess will be taxed at a rate of 15%. Any capital gains below the $31,850 line are still taxed at 5%, and the remainder of the capital gain that is over that line is subject to the 15% rate. [7]
The 25% Rate for Unrecaptured Sec. 1250 Gain:
A flat 25% capital gains rate is imposed on so-called "unrecaptured 1250 gain". This type of gain occurs only where net capital gain partly consists of gain arising from the sale or exchange of depreciable real property used in the taxpayer's business or held for investment.[8]
The 28% Rate for Collectibles and Sec. 1202 Gains:
Any capital gains arising from the sale or exchange of collectibles and/or Sec. 1202 stock will be taxed at a rate of 28%.[9]

Seven Pillars of capital gain treatment

Seven Pillars of capital gain treatment
Seven Pillars of Capital Gain Treatment5 for deciding if properties were held for investment purposes or primarily for sale to customers in the ordinary course of his trade or business and therefore warranted capital gains treatment under I.R.C. §§ 1201, 1202.
the nature and purpose of the acquisition of the property and the duration of the ownership;
the extent and nature of the taxpayer's efforts to sell the property;
the number, extent, continuity and substantiality of the sales;
the extent of subdividing, developing, and advertising to increase sales;
the use of a business office for the sale of the property;
the character and degree of supervision or control exercised by the taxpayer over any representative selling the property; and
the time and effort the taxpayer habitually devoted to the sales.