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. Phantom Gain

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

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

    A type of tax levied on capital gains incurred by individuals ...
  5. Capital Appreciation

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

    Selling securities at a loss to offset a capital gains tax liability. ...
Related Articles
  1. Solutions For Concentrated Positions
    Investing Basics

    Solutions For Concentrated Positions

  2. The Art Of Cutting Your Losses
    Active Trading Fundamentals

    The Art Of Cutting Your Losses

  3. Capital Gains Tax 101
    Taxes

    Capital Gains Tax 101

  4. Seek Out Past Losses To Uncover Future ...
    Active Trading

    Seek Out Past Losses To Uncover Future ...

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center