Long-Term Capital Gain Or Loss

AAA

DEFINITION of 'Long-Term Capital Gain Or Loss'

A gain or loss from a qualifying investment owned for longer than 12 months and then sold. The amount of an asset sale that counts toward a capital gain or loss is the difference between the sale value and the purchase value. Long-term capital gains are assigned a lower tax rate than short-term capital gains in the United States.

INVESTOPEDIA EXPLAINS 'Long-Term Capital Gain Or Loss'

Capital gains and losses can be netted out in any given tax year and up to the first $3,000 of any net gain or loss can be carried over into future years.

For example, let's say that an investor sells three stocks during the calendar year, all of which were held for several years. The first stock is sold for a loss of $3,000, the second is sold for a $2,500 gain and the third is sold for a $4,000 gain. If the investor makes no other sales during the year, he will have a net gain of $3,500 for the year (-$3,000 + $2,500 + $4,000 = $3,500). The first $3,000 of long-term gains could be carried over into the next year, but the remaining $500 in gains would be taxed that year at the prevailing rate.

RELATED TERMS
  1. Capital Accumulation

    This refers to profits that a company uses to increase its capital ...
  2. Capital Appreciation

    A rise in the value of an asset based on a rise in market price. ...
  3. Tax Gain/Loss Harvesting

    Selling securities at a loss to offset a capital gains tax liability. ...
  4. Phantom Gain

    A situation that arises when a gain on an investment is offset ...
  5. Income Tax Payable

    A type of account in the current liabilities section of a company's ...
  6. Capital Gains Tax

    A type of tax levied on capital gains incurred by individuals ...
Related Articles
  1. Every retail investor might face with a problem regarding their stock holdings.
    Investing Basics

    Solutions For Concentrated Positions

  2. Active Trading Fundamentals

    The Art Of Cutting Your Losses

  3. Taxes

    Capital Gains Tax 101

  4. Active Trading

    Seek Out Past Losses To Uncover Future ...

Hot Definitions
  1. Capitulation

    When investors give up any previous gains in stock price by selling equities in an effort to get out of the market and into ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  4. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  5. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  6. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
Trading Center