Equity Tax Treatment: Rapid Fire
Chapters in this video
- 0:00 The one-year trap and 366-day rule
- 1:32 Short-term ordinary rates vs. long-term preferential rates
- 2:15 The $3,000 net capital loss deduction and indefinite carryforward
- 2:45 Netting within categories then across: character follows the larger
- 3:30 Wash sale 61-day window and the IRA black hole
- 4:45 Call options trigger wash sales, different issuers do not
- 5:04 Inherited: stepped-up basis and always long-term
- 6:02 Gifted dual basis and no man's land
- 6:55 Qualified dividends, FIFO default, and return of capital
- 7:33 Rapid-fire exam recap
What this video covers
- Why exactly one year is still short-term and long-term requires 366 days minimum (one year plus one day)
- How to net capital gains and losses within categories first, then across categories, and why the survivor takes the character of the larger gross amount
- What triggers a wash sale, including the 61-day window and the call option trap, and what happens to deferred losses in taxable accounts versus permanent loss in an Individual Retirement Account (IRA)
- When inherited securities receive stepped-up basis to fair market value (FMV) at death and why they are always long-term regardless of actual holding period
- How the dual basis rule works for gifted depreciated securities: carryover basis for gains, FMV at gift for losses, and no man's land in between
- What makes a dividend qualified (more than 60 days in the 121-day window) versus non-qualified, and why FIFO is the default lot method that produces the largest gain in rising markets
- How return of capital reduces cost basis dollar for dollar until zero, and why conversion of a bond or preferred stock to common carries over the original basis
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