HOLDING PERIODS TO DETERMINE SHORT-TERM OR LONG-TERM GAIN OR LOSS:
Short-Term means a holding period of 1-year or less.
Long-Term means a holding period of more than 1-year.
When determining how long an asset wah held, the taxpayer generally begins counting on the date after the property was acquired. The same date of each following month is the beginning of a new month regardless of the number of days in the preceding month.
The date the asset is sold or disposed of is part of the holding period.
Short term gains are taxed at ordinary income tax rates according to your tax bracket while long term gains are taxed at lower capital gains tax rates.
If you've held the property for more than one year, your gain or loss is a long-term capital gain or loss.
If you've held the property for one year or less, your gain or loss is a short-term capital gain or loss.
Stocks & Securities traded on an established market:
The holding period for stock and securities purchased on an exchange begins the day following the purchase (the trade date) and ends on, and includes, the date of sale, rather than the day when payment is received and delivery is made (the settlement date). You ignore the settlement date for holding period purposes.
Thus, the holding period begins the day after the trade date and ends on the trade date you sold the securities.
Trade Date: the date your purchase or sales order is executed.
Settlement Date: the date when stock or securities are delivered and paid for (**may occur several days after the trade date).
Inherited Property:
Inherited property from a decedent is deemed to be held long-term (regardless of how long you actually held the property).
Gifted Property: Two Basis Rules & Two Holding Period Rules:
Gain Basis Property (F.M.V > Donor's Cost or Adjusted Basis on date of gift)------Gain Basis = Donor's cost or adjusted basis on date of gift.
If you use the donor's carryover cost or adjusted basis for appreciated property at the date of gift, your holding period includes the donor's carryover holding period plus the donee's own holding period (the holding period begins on the date the property was acquired by the donor).
**Your holding period begins on the same day the donor's holding period began.
Loss Basis Property (F.M.V.< Donor's Cost or Adjusted Basis on date of gift)------Loss Basis = F.M.V. on date of gift.
If your basis in the gifted property is determined by the Fair Market Value of the gift, your holding period starts on the day after the gift was made.
Stock Acquired In A Spinoff:
The holding period for new stock you receive begins on the same day as the holding period fopr the old stock.
Wash Sales:
After a wash sale, the holding period of the new stock includes the holding period of the old stock for which a loss has been disallowed.
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