Long-Term Capital Gain Or Loss


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.

BREAKING DOWN '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.

  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. Income Tax Payable

    A type of account in the current liabilities section of a company's ...
  4. Phantom Gain

    A situation that arises when a gain on an investment is offset ...
  5. Tax Gain/Loss Harvesting

    Selling securities at a loss to offset a capital gains tax liability. ...
  6. Capital Gains Tax

    A type of tax levied on capital gains incurred by individuals ...
Related Articles
  1. Mutual Funds & ETFs

    ETF/ETN Analysis: iPath S&P GSCI Crude Oil

    Learn about iPath S&P GSCI Crude Oil exchange-traded notes and how investors can use this ETN to profit from short to intermediate changes in oil prices.
  2. Investing Basics

    Solutions For Concentrated Positions

    Investopedia explains various tactics for divesting your overexposure to any one stock.
  3. Active Trading Fundamentals

    The Art Of Cutting Your Losses

    Taking corrective action before your losses worsen is always a good strategy. Find out how to keep your capital losses small and let your winners run.
  4. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  5. Active Trading

    Seek Out Past Losses To Uncover Future Gains

    Tax loss carry-forwards can help reduce the tax burden of owning a profitable fund.
  6. Stock Analysis

    The 5 Best Buy-and-Hold Energy Stocks

    Understand why energy companies' stock are volatile when oil prices are volatile. Learn about the top five energy companies to buy and hold.
  7. Investing Basics

    Statistical Proof That Buy-and-Hold Investing Pays Off

    Learn about how the data suggests that the buy-and-hold investment strategy still works, even after the huge declines of the Great Recession.
  8. Stock Analysis

    3 Reasons Why Applied Materials, Inc. is Poised for Growth

    Read why Applied Materials may be poised for growth after shares lost substantial value in the wake of a failed merger with a Japanese competitor.
  9. Insurance

    Warren Buffett: The Road To Riches

    Find out how he went from selling soft drinks to buying up companies and making billions of dollars.
  10. Mutual Funds & ETFs

    Top 4 Municipal Bond ETFs

    Explore analyses of four popular ETFs that track the municipal bond market, and learn how these ETFs are beneficial to investors in high tax brackets.
  1. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  2. What is the formula for calculating the capital asset pricing model (CAPM) in Excel?

    The capital asset pricing model (CAPM) measures the amount of an asset's expected return given the risk-free rate, the beta ... Read Full Answer >>
  3. What is the formula for calculating return on investment (ROI) in Excel?

    Return on investment (ROI) measures the performance of an investment by measuring the gain from an investment and the cost ... Read Full Answer >>
  4. Is it better to buy A-shares or a no-load mutual fund?

    Mutual funds and other pooled investments are popular among investors because they provide a level of diversity and professional ... Read Full Answer >>
  5. What is the smallest amount of shares I can buy?

    There is no minimum amount of shares that need to be bought in a single transaction, so an investor can purchase as little ... Read Full Answer >>
  6. Is Book Value Of Equity Per Share (BVPS) a good metric for long-term value investing?

    Book value of equity per share, or BVPS, also known as net asset value per share or simply equity per share, estimates the ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!