WHAT ARE SHORT-TERM VS. LONG-TERM CAPITAL GAINS AND LOSSES?

Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gains or loss is long-term. If you hold it one year or less, your capital gains or loss is short-term.

WHAT IS THE BASIS AND HOW IS IT DETERMINED?

You need to know your basis in your home to calculate any gain or loss when you sell it. Your basis is determined by how you acquire your home. If you purchased or built it, your basis is your initial cost. If you acquired it in some other way (inheritance, gift, etc.), you must know its adjusted basis to the donor just before it was given to you. You also must know its fair market value (FMV) at the time title was transferred. For more information, lot onto www.irs.gi! v ! and search for publication 551 (Basis of Assets).

WHAT ARE THE CURRENT CAPITAL GAINS RATES?

The maximum tax rate on net capital gain (i.e., net long-term capital gain reduced by any net short-term capital loss) is now 15%. Gains that would otherwise be taxed at a regular rateof 10% or 15% are now 5% for property sold or otherwise disposed of after May 5, 2003 (and installment sale payments received after that date.) The reduced rate applies for both the regular tax and the alternative minimum tax. The higher rates that apply to un-recaptured section 1250 gain, collectibles gain, and section 1201 have not changed.