Capital Gains and Capital Losses

What are capital gains and losses?

Capital gains and losses are the outcomes of selling a capital asset, whereas you made a profit or encountered a loss. Almost everything you own and use for either personal or investment purposes is a capital asset. Examples of capital assets are your house, car, mutual funds, gems and jewelry, coin or stamp collections, equipment etc. Your basis includes any other associated costs like shipping costs, fees, commissions, installation costs etc.

If you sold an investment for more than the original purchase price (basis), then the earnings are the gain. Profits are considered taxable income. If you sold your investment for less than the basis, then the difference is the loss. This is done on a Schedule D using Form 8949.

You do not have to file a Schedule D with the attached Form 8949 if you do not have capital losses and your capital gains are distributions from Form 1099-DIV, reported in Box 2a. You also do not have to file if Box 2b, 2c, and 2c on Form 1099-DIV are empty.

If you received capital gain distributions which belonged to someone else, this means you were a nominee, a trusted individual whose entitled to receive distributions. Report the amount that belongs to you on line 13 on Schedule D.


File a Schedule D

You must file a Schedule D but can file without Form 8949 is you meet these requirements.

  • Capital gains and losses are from capital gain distributions,
  • You have a capital loss carryover,

Capital gains and losses are classified as long-term if you held the property for more than one year, or short-term if you held the property for one year or less before selling it. If your net long-term capital gain is greater than your net short-term capital loss, you have a net long-term capital gain.

  • Your gain is Undistributed Long-Term Capital Gains (Form 2439),
  • Installment Sale Income (Form 6252),
  • Sale of a Business Property Part 1: Sales or Exchanges of Property Used in a Trade or Business and Involuntary Conversions From Other Than Casualty or Theft—Most Property Held More Than 1 Year on Part 1 of (Form 4797),
  • Gain or loss from Casualties and Thefts (Form 4684),
  • Gains and Losses From Section 1256 Contracts and Straddles (Form 6781),
  • Like-Kind Exchanges (Form 8824),
  • Gain or loss from a Partnership, S-Corporation, Estate or Trust
  • Gains and losses (Form 1099-B)
  • Sales and Other Dispositions of Capital Assets (Form 8949).

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