How Do I Know if I Have a Short Term or Long Term Transaction?

How Do I Know if I Have a Short Term or Long Term Transaction?

To determine whether a transaction results in a short-term or long-term capital gain or loss, you must evaluate the holding period of the asset.

Key Rules for Holding Period

• Short-term transaction: If you held the capital asset for 1 year or less, the gain or loss is considered short-term.
• Long-term transaction: If you held the capital asset for more than 1 year, the gain or loss is considered long-term.

Note: For certain assets, such as "applicable partnership interests," the long-term holding period may be more than 3 years, beginning in 2018. Refer to Publication 541 for details.

Reporting Requirements

• Report short-term gains or losses on Part I of Form 8949 and/or Part I of Schedule D (Form 1040).
• Report long-term gains or losses on Part II of Form 8949 and/or Part II of Schedule D (Form 1040).

You must use your own records to determine whether a gain or loss is short-term or long-term. The IRS requires accurate recordkeeping to support your reporting.

Special Cases

• If you receive a share of capital gains or losses from a partnership, estate, or trust, report them on Form 8949 based on the character (short-term or long-term) provided on Schedule K-1 (Form 1065) or Schedule K-1 (Form 1041).
• For digital assets, if you sell or dispose of them, the gain or loss is taxed as a capital gain or loss. The holding period rules apply the same way as for other assets.

Source:

Form 8949

Schedule D (Form 1040)

Digital Asset FAQ

IRS Forms and Publications

Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.