September 3, 2014
What makes a sale of a security a long term capital gain rather than a short term capital gain? What would be preferable? Why?
What makes a sale of a security a long term capital gain rather than a short term capital gain? What would be preferable? Why?
The difference between long term capital gains and short term is the time that you held the stocks for, for long term that is over a year and for short term that is under. For long term capital gains you pay the long term capital gains rate which is much lower then the regular income tax rate. When you sell and have short term capital gains they are taxed like regular earned income. You want to pay as little in taxes as you can so long term capital gains are preferable. They can both be avoided if you use a tax shelter such as a ROTH IRA.
You answered the question beautifully, Garrett. I have nothing to add. Nice job!