Reporting Capital Gains

If you own something and use it for personal or investment purposes, it is a capital asset. If you sell a capital asset, the difference of the adjusted basis of the asset and the sale will lead to either a capital gain or loss. This is reported on Schedule D of your federal tax return. Form 1099-B will show transactions like the sales of stocks, bonds or other property and must be reported on your tax return

Here are examples of capital assets:

• Stocks or bonds
• Your home/business property
• Household furnishings
• Coin or stamp collections
• Jewelry/Gold/silver or any other metal

Long-term vs Short-term

Capital gains and losses are either long-term or short-term. It is dependent on how long you hold the asset. Here are the distinguishing factors today:

• If you hold an asset for more than one year before disposing of it, it is long-term
• Once you hold it less than a year, it is short-term

What is a basis?

If you sell the asset for more than your basis, you have a capital gain. However, if you sell the asset for less than your basis, you have a capital loss.

Your basis is your cost plus improvements. You should keep record of your purchase price, including commissions; changes to your basis, non-dividend distributions on stock, and stock splits.

Although capital gains are taxable, only a capital loss on an investment or business property is deductible.

This entry was posted on Friday, November 13th, 2020 at 12:44 am and is filed under Income. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.