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:
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:
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.
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.
Although capital gains are taxable, only a capital loss on an investment or business property is deductible. If your capital losses exceed your capital gains, the amount of the excess loss that you can claim to lower your income in any one tax year is the lesser of $3,000 ($1,500 if married filing separately) or your total net loss. If your net capital loss is more than this limit, you can carry the loss forward to later years until the amount is exhausted. The carry forward amount cannot exceed $3,000 per tax year.
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