Capital Gain and Loss Scenarios for the Stock Trader

By Paul Mladjenovic

Any stock investor can come up with hundreds of possible gains and losses scenarios. For example, you may wonder what happens if you sell part of your holdings now as a short-term capital loss and the remainder later as a long-term capital gain. You must look at each sale of stock (or potential sale) methodically to calculate the gain or loss you would realize from it.

Figuring out your gain or loss isn’t that complicated. Here are some general rules to help you wade through the morass. If you add up all your gains and losses and

  • The net result is a short-term gain: It’s taxed at your highest tax bracket (as ordinary income).

  • The net result is a long-term gain: It’s taxed at 15 percent if you’re in the 28 percent tax bracket or higher. If you’re in the 15 percent tax bracket or lower, the tax rate on long-term capital gains is 0 percent in 2011.

  • The net result is a loss of $3,000 or less: It’s fully deductible against other income. If you’re married filing separately, your deduction limit is $1,500.

  • The net result is a loss that exceeds $3,000: You can only deduct up to $3,000 in that year; the remainder goes forward to future years.