Concept
Capital Gains Basics
A capital gain or loss occurs when you sell a capital asset (stocks, bonds, real estate) for more or less than its adjusted basis (usually purchase price). Gain = Amount Realized − Adjusted Basis.
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Capital Gains & Losses
Concept
Short-Term vs. Long-Term
Assets held 1 year or less → short-term capital gain/loss (taxed at ordinary income rates). Assets held MORE than 1 year → long-term capital gain (taxed at preferential rates: 0%, 15%, or 20% depending on income).
Key Point
Net Capital Loss Deduction
If capital losses exceed capital gains, individuals can deduct up to $3,000 of net capital loss against ordinary income per year. Any excess carries forward indefinitely to future years.
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