Question

The gain or loss realized on the sale of a capital asset is considered a long-term capital gain or loss only if the taxpayer owned the asset at the time of sale for longer than (search chapter 5)

a. 6 months
b. 1 year
c. 18 months
d. 2 years

Answer 1

A gain or loss on the sale of a capital asset is considered long-term if the asset was held for more than 1 year before the sale.

• The gain or loss realized on the sale of a capital asset is considered a long-term capital gain or loss only if the taxpayer owned the asset at the time of sale for longer than 1 year.
• This means that if you purchase a stock, a piece of real estate, or another investment, and you sell it after holding it for more than 12 months, any profit you make is treated as a long-term capital gain for tax purposes.
• Conversely, if you sell the asset after owning it for one year or less, any profit is considered a short-term capital gain, which is typically taxed at a higher rate than long-term gains.