A Capital Gain or Loss results from the sale or exchange of a Capital asset. Capital assets are all types of property except:
-Trade accounts receivable;
-Depreciable business property and real estate;
-Copyrights and the like;
-U.S. Government publications.
Capital gains and losses are NOT recognized unless a sale or other disposition of a capital asset takes place. For example, unless a taxpayer's mutual funds are sold for cash or exchanged for other types of securities, no capital gains or losses are recognized. Therefore, no taxes are paid even if the mutual funds have gone up in value, but not sold or exchanged.
Year-End Planning Tip: Do not sell or exchange a capital asset unless and until all the tax consequences have been considered!
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