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Long Term Assets & Capital Gain

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Another case is of shares. Over the years if the values of the share appreciate capital tax cannot be levied only on gains. Only when an individual decides to sell the shares then capital tax is levied on the gains. In the case of mutual funds, accumulated capital gains are distributed to the shareholders. Individuals receiving the distribution get a 1099-DIV form detailing the amount of the capital gain distribution and how much is considered short-term and long-term .

Also if you sell precious metals in the United States then you are required to report the income in your income tax return. The guidelines for precious metals can be found in The International Council for Tangible Assets (ICTA).

Once you understand that capital gains result in capital tax, you should also understand how to reduce these taxes. Firstly it’s always wise to wait for more than a year before selling an asset. It’s always better to sell when your income is low.

The long-term capital gains rate is determined by one’s marginal tax rate, which is then dependent on an individual’s income. Selling assets when income is low or during retirement, minimize the amount of capital gain tax levied. Capital gains can be used to offset capital loss. For example if you sell asset A for 50$ profit and sell asset B for loss of 30$, the net capital gain is 20$. By using capital losses in the years where he made capital gains an individual can lower his capital gains tax significantly.

Holding on to assets for a long period of time is therefore wise. One should sell when the market price is good or when income is less so that the tax applied on the capital less is also less. Also it’s always wise to sell a property before it depreciates.

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