A blog about stock portfolio management

Holding period for long-term capital gain: more than one year

January 12, 2010

Holding period for stock matters greatly, because stock held long-term incurs a lower tax rate when sold. If a stock is held more than one year, the capital gain is long-term.

A sale on the first anniversary of the purchase is short-term

To have a short-term gain, or loss, the stock must be held one year or less. The holding period begins on the day after the trade date and includes the trade date of the sale.

When the sale trade date is prior to the first anniversary of the day after the purchase trade date, a short-term gain, or loss, results.

For a stock purchased on April 30, 2008, the holding period begins the next day, May 1, 2008. A sale of that stock for a gain on April 30, 2009 will realize a short-term gain. Waiting until May 1, 2009 to sell will produce a long-term gain.

Leap years follow the same rule

Consider a stock purchased on Feb 28, 2011. If this stock were sold on Feb 29, 2012, the holding period would still be short-term. In this case, the holding period would have begun on March 1, 2011.

Tags: capital-gain