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1.
If an investor has held a security for less than one year, at what rate will his or her capital gains be taxed?
It depends on the investor's ordinary income tax rate. If an investor has held the security for at least one year, he's eligible for the long-term capital gains tax rate. Short-term gains--gains made on securities held for less than one year--are taxed at his ordinary income tax rate.
2.
What is tax-loss selling?
Selling investments that you've lost money in to offset the gains you're taking on winning investments. Tax-loss selling is a way for investors to manage the amount of taxes that they pay on their investments today.
3.
In which situation might you consider waiting to sell an investment?
A big capital gains tax would hit you hard right now. Consider waiting until you can make up that hit with other tax savings.
4.
Your basis in an investment is how much you paid for it.
False. You may need to include reinvested dividends that have already been taxed.
5.
What is the purpose of tax-loss selling?
To minimize the amount of tax that you pay on an investment that you have sold for a profit. Tax-loss selling is a tax-management strategy.
