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. Phantom Gain

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

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

    A type of tax levied on capital gains incurred by individuals ...
  6. Tax Gain/Loss Harvesting

    Selling securities at a loss to offset a capital gains tax liability. ...
RELATED FAQS
  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 >>
Related Articles
  1. Investing Basics

    Solutions For Concentrated Positions

    Investopedia explains various tactics for divesting your overexposure to any one stock.
  2. 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.
  3. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  4. 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.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Emerging Markets

    Learn more about the most liquid and highly traded emerging market ETF in the world -- the iShares MSCI Emerging Markets ETF (EEM).
  6. Stock Analysis

    The Best Buy-and-Hold Stocks for Your Retirement Portfolio

    These stocks offer stability while exhibiting strong indicators of future growth.
  7. Investing Basics

    Explaining Value Stock

    Investors look for value stocks because they consider them to be underpriced based on the stock’s fundamentals.
  8. Stock Analysis

    The 3 Best Buy-and-Hold Stocks For the Next 10 Years

    Find out what makes electric cars, burritos and muscle shirts great buy-and-hold additions to your long-term portfolio.
  9. Stock Analysis

    Long-Term Outlook For Duke Energy

    Learn why Duke Energy is showing both positive and negative signs for long-term investors, and understand how an interest rate increase may impact the company.
  10. Investing Basics

    Know When To Buy & Hold It, Know When To Fold It

    A passive buy-and-hold strategy using ETFs is one of the most efficient ways of building a portfolio.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
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!