Capital Gain

A capital gain results when a capital asset is sold for an amount that exceeds the item’s purchase price. If the asset sells for less than the purchase …

A capital gain results when a capital asset is sold for an amount that exceeds the item’s purchase price. If the asset sells for less than the purchase price, then it is a capital loss. If an asset is held for longer than one year before being sold, it results in a long-term capital gain. The profit from the sale of an asset held for one year or less is a short-term capital gain.

The amount by which your net long-term capital gain is greater than your net short-term capital loss for the year is your net capital gain. Your net capital gain is typically taxed at a rate lower than 15%. Net capital gain on collectibles and the taxable portion of a gain on qualified small business stock are taxed at 28%. The portion of a net capital gain on real property that must be recaptured in excess of straight-line depreciation can be taxed at rates up to 25%.

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If your net capital losses are greater than your net capital gains, the losses can only be claimed up to $3,000 ($1,500 for married filing separately). Loss in excess of this amount can be carried over to following years.

Report capital gains and losses to the IRS on Form 1040, Schedule D.

SOURCES
1. IRS – Topic 409 Capital Gains and Losses

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