How to Determine a Long-Term Tax Gain

Compute your capital gain carefully.

When you buy a stock or mutual fund, you hope to earn a profit on the eventual sale. However, when you make money on an investment, you must carefully compute the capital gain and pay taxes on this amount. If you have held the asset for at least a year and a day, you will pay taxes at a maximum rate of 15 percent, as of 2011.

Instructions

1. Find the original purchase confirmation for the stock or mutual fund you sold. Make sure the date is at least one year and one day before the date you sold the investment. If you held it for a year or less, you have a short-term capital gain instead of a long-term one.

2. Review the purchase confirmation and find the original purchase price of the investment. Add the brokerage commission you paid when you bought the stock or mutual fund and the commission you paid when you sold it.

3. Add any dividends you received while you owned the investment. You have already been taxed on the dividends, so they become part of your cost basis.

4. Compare the amount of money you received when you sold the stock with the total of the original purchase price, dividends and brokerage commissions. This is the amount of your capital gain.

References

• IRS: Capital Gains and Losses