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Long-term capital gains

The lower tax rate applied to gains on assets held beyond a threshold period, one year in the United States, versus ordinary rates on shorter holdings.

The holding period starts the day after acquisition and is tested on the trade date of the sale. Crossing it can be worth a large share of the gain, which is why the calendar sometimes dominates the trade decision near the boundary.

Several mechanics reset or suspend the clock: a wash-sale-rule adjustment carries the old holding period forward, a protective-put or collar can suspend it, and shares received in an all-stock-deal usually inherit the original date while an all-cash-deal ends it.

Example: a $30,000 gain taxed at 35% short term costs $10,500. Held four more weeks to qualify at 15%, the tax is $4,500. The $6,000 saving is 20% of the gain, and the risk is four weeks of price exposure.

Related: cost-basis, tax-lot, tax-loss-selling, wash-sale-rule, all-stock-deal

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