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Capital Loss

Both the terms "capital gain" and "capital loss" are financial references to the performance of a value of a given asset over time in relation to the original price paid for the asset. Obviously, then, if an asset decreases in value over time or depreciates, it is said to have incurred a capital loss. If the asset increases in value over the same period of time or appreciates, it is said to have incurred a capital loss.

Under the provisions of Section 1222 of the United States federal tax code, the tax consequences of capital gains and capital losses are defined. Capital gains generated by real estate, stocks and bonds, and personal property are taxable. Capital losses, however, may not be declared as a deductible. When an asset is held for a period longer than one year it is classes as "long-term." When taxes are applied to a long-term capital gain the rate of taxation is 15 percent.

More Glossary Terms Explained here


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