An allowable capital loss refers to the loss that an investor or taxpayer sustains from the sale or exchange of a capital asset, which the IRS permits to be deducted against capital gains when computing taxes.
Capital assets are forms of property with a relatively long life, often used in trade or business, that receive specific tax treatments when sold, resulting in either capital gain or capital loss.
The holding period is the length of time an investment is owned or expected to be owned. It is critical in determining if a gain or loss from the sale or exchange of a capital asset is long-term or short-term for tax purposes.
A bond issued by a state or local government body such as a county, city, town, or municipal authority. Typically, the interest earned on municipal bonds is generally not taxable by the U.S. government, nor in the jurisdiction that issued it.
An asset of little or no value, often used for capital gains tax purposes. Such assets can be treated as sold and immediately reacquired at a negligible value, resulting in an allowable capital loss.
An ordinary loss for income tax purposes is a type of loss that can be deductible against ordinary income. This is usually more beneficial to an individual taxpayer compared to a capital loss, which has limitations on deductibility.
For tax purposes, a short-term capital gain (loss) is the profit (loss) realized from the sale of securities or other capital assets not held long enough to qualify for a long-term capital gain (loss).
Ordinary deduction treatment for certain individuals and partnerships on the sales of stock or in cases of bankruptcy, allowing for ordinary loss treatment up to specific limits.
Tax loss carryback and carryover are tax benefits that allow taxpayers to use losses from one year to offset taxable income in other years, effectively reducing tax liability.
Worthless securities are financial instruments that have no value. Ownership of worthless securities typically results in a capital loss for the investor.
Yield to Maturity (YTM) is the total return anticipated on a bond if it is held until it matures. YTM takes into account the bond's current market price, par value, coupon interest rate, and the time to maturity.
