Capital Gain or (Loss)

You have a capital gain, if the amount received from the sale or exchange of a capital asset exceeds (is more than) your adjusted basis in the capital asset.

You have a capital loss, if the amount received from the sale or exchange of a capital asset is less than your adjusted basis in the capital asset.

Capital assets include almost everything owned by you for either personal or investment purposes. Examples include your home, personal-use items like household furnishings, and stocks and bonds held as investments. Your adjusted basis is generally the total cost you paid for the asset plus any improvement costs and minus any depreciation deductions taken.

Gains from the sale or exchange of capital assets are taxed at different rates depending on the length of time you had the assets Generally:

• Gains from the sale or exchange of capital assets held for more than one year are taxed at favorable capital gains rates.
• Gains from the sale or exchange of capital assets held for not more than one year are taxed at ordinary income rates.

To calculate short-term and long-term capital gain or loss, refer to IRS Form 8949, Sales and other Dispositions of Capital Assets and IRS Schedule D, Capital Gains and Losses.

Note: The law places a limit on the deduction for capital loss and allows you to carry the unused loss forward to later years. For more details, see capital gains and losses instructions.