Capital Gains and Losses - Calculating Gains and Losses
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Capital gains and losses are reported on Form 8949 Sales and Other Dispositions of Capital Assets and Schedule D (Form 1040) Capital Gains and Losses. For more information regarding capital gains and losses, please refer to:

ADJUSTED BASIS: Before you can figure any gain or loss on a sale, exchange, or other disposition of property or figure allowable depreciation, depletion, or amortization, you usually must make certain adjustments (increases and decreases) to the basis of the property. The result of these adjustments to the basis is the "adjusted basis."

An example of increase to basis would be capital improvements, whereas depreciation would be a decrease of basis. Please refer to IRS Publication 551 for additional information and examples of increases and decreases to basis.

SALE: A "sale" is generally a transfer of property for money or a mortgage, note, or other promise to pay money. A trade is a transfer of property for other property or services, and may be taxed in the same way as a sale. A redemption of stock is treated as a sale or trade.

FIGURING GAIN OR LOSS: A "gain or loss" on a sale or trade of property is determined by comparing the amount you realize with the adjusted basis of the property.

AMOUNT REALIZED: The amount you realize from a sale or trade of property is everything you receive for the property. This includes the money you receive plus the fair market value of any property or services you receive.

GAIN: If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a "gain."

LOSS: If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a "loss."

BASIS: Basis is a way of measuring your investment in the property for tax purposes. You must know the basis of your property to determine whether you have a gain or loss on its sale or other disposition. Investment property you buy normally has an original basis equal to its cost.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.