Capital asset deemed-sale election. (Line Items).

* The current long-term capital gains rate is 20% for assets held for more than one year by taxpayers in the 15% or higher tax bracket. The Taxpayer Relief Act of 1997 created a reduced 18% capital gain tax rate for capital assets acquired after 2000 and held for five years. However, a taxpayer (an individual or flow-through entity) can elect to treat assets held before January I, 2001, as sold and repurchased on that date to qualify for the 18% rate. Gain resulting from the deemed sale is subject to tax on the taxpayer's 2001 return.

The taxpayer makes the election with the return for the period that includes January 1, 2001, either on an original or amended return filed by the extended due date (October 15 for individuals and calendar-year partnerships, limited liability companies and trusts). Once made, the election is irrevocable.

If a taxpayer has significant capital assets and is planning to hold them for more than five years, he or she ultimately may pay lower taxes by converting the 20% assets into 18% assets. The election cannot be used to recognize losses; see Notice 2002-58.