CFP

Tax Consequences - Holding Period

Holding Period
Sales of capital assets should always be classified as either short-term or long-term held assets. Short-term assets are those held for one year or less, and long-term assets are held for more than one year. Sales of these assets are typically reported on Schedule D for the federal tax return filing.  

Assets held for one year or less:
Gains and losses of assets held for one year or less are categorized as short-term, and they're reported in Part I of Schedule D. These short-term gains and losses can be netted against each other to determine the net ST gain or loss.

Assets held for more than one year:
Gains and losses of assets held for more than one year are categorized as long-term, and they're reported in Part II of Schedule D. These long-term gains and losses can be netted against each other to determine the net LT gain or loss. Long-term gains typically receive a more favorable tax treatment than short-term gains.

After short-term gains and losses and long-term gains and losses are netted separately in parts I and II of Schedule D, they can then be netted together for an overall net result. Net loss in excess of net gains is deductible up to the $3,000 capital loss. If the loss was not completely exhausted, it can be carried forward to future tax returns.



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