Tax on capital gain from stock investment?

Question

hi,
i know that for long-term capital gain, we would be taxed at 15% of the tax bracket and for capital loss (regardless time frame), it can be tax-deductible for up to 3000.

however, let say this year, I've have lost 3000 in one stock, and 3000 long term capital gain on another stock. According what I have researched, these will cancel out one another. Is this true, or these two transactions can be recorded seperately according the the rule i described above.

in another word, the gain/loss is the net of investment or each transaction is applied toward the rule.

thanks.

Answer 1

The 3000 loss and the 3000 gain would cancel each other out. They would be recorded separately but it's the net total of $0 gain/loss that would show on your Schedule D. It's your net for the year that counts. By the way, while the capital gains is taxed at a maximum 15% bracket, if you are in the 10% or 15% tax brackets the rate is 5% instead of 15%.

Answer 2

Couple quick definitions/assumptions first, then I will attempt to answer your question:

Definitions:

Capital Gain: When you sell an investment (like a stock) for more than its basis (in general, what you have paid for it).

Capital Loss: When you sell an investment (like a stock) for less than its basis (in general, what you have paid for it).

I include the definitions only because it is not clear to me if your 'loss' is a capital loss (where you have sold the stock), or if you still own the stock but it has gone down in value. If you still own the stock (no partial sale) and it has lost value, it is not considered a capital loss for tax purposes.

Assumptions: I am assuming that the investments in question are held by an individual taxpayer (not a company or corporation), and that the loss is a capital loss (see above).

Answer:

If in a particular year, you have capital gains and capital losses, you net the capital gains and capital losses.

If you end up with a net capital gain, you pay tax on the net capital gain only (based upon a calculation which factors in how long you held the stocks - long term vs short term)

If you end up with a net 0 (no gain or loss), you pay no tax on the investing activities

If you end up with a net capital loss, you can deduct up to 3000 of that loss in the current year, and any net capital losses over and above the 3000 can be carried forward and offset against future investment and/or ordinary income.

Hope this helps

Answer 3

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Answer 4

They'll be shown separately on your schedule D, but they will then be netted together so in effect will cancel each other out.