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Series 7 practice questioneasyTax Implications — Capital Gains

A security must be held for more than how long to qualify for long-term capital gains treatment?

  1. A12 months (one year)✓ Correct answer
  2. B6 months
  3. C18 months
  4. D24 months
Explanation

Why A — 12 months (one year)

To qualify for long-term capital gains tax treatment, a security must be held for more than one year (12 months). The holding period begins the day after purchase and includes the day of sale. Long-term capital gains are taxed at preferential rates (0%, 15%, or 20% depending on income), while short-term capital gains (held one year or less) are taxed as ordinary income.

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