Holding Period for Certain Types of Items

Stocks and Bonds Traded on a Public Exchange

The holding period begins the day after the trade date and ends on the trade date you sold securities.

The trade for stock sold on a public exchange is the date your purchase or sales order is executed. Don't confuse the trade date with the settlement date. The settlement date is the date the securities are delivered and paid for.

Taxable Stock Dividends

The holding period for taxable stock dividends begins on the date of distribution.

Nontaxable Stock Dividends

The holding period for new stock you receive as a nontaxable stock dividend begins on the same day as the holding period for the old stock.

Stock Acquired in a Spin Off

A spin-off is a distribution of stock from a controlled corporation. The holding period for new stock you receive begins on the same day as the holding period for the old stock.

Tax-free Stock Right

When you exercise rights to acquire corporate stock from the issuing corporation, your holding period for the stock begins on the day of exercise, not the day after. You are deemed to exercised stock rights when you assent to the terms of the rights in the manner requested or authorized by the corporation. An option to acquire stock is not the same as a stock right.

Stock Subscriptions

The holding period begins the day after the date on which the stock is issued, provided you are bound by your subscription, but the corporation is not bound. However, if both you and the corporation are bound, the date the subscription is accepted by the corporation is the date of acquisition, and your holding period begins the day after.

Wash Sales

After a wash sale, the holding period of the new stock includes the holding period of the old stock for which a loss has been disallowed.

The wash sale rule disallows a loss deduction if within 30 days after the sale, you purchase substantially identical stock or securities or a put or call option on such securities. If your spouse buys the securities within 30 days the loss is still denied.

U.S. Treasury Notes and Bonds

If the securities are bought at auction, the holding period begins the day after notification of bid acceptance. If bought through subscription, the holding period begins day after subscription was submitted.

Gifts

If you receive a gift and your basis in the property is determined by the donor's adjusted basis, your holding period begins on the same day the donor's holding period began.

If your basis is determined by the fair market value of the property, your holding period begins on the day after the date of the gift.

Inherited Property

By law, inherited property automatically gets a holding period of more than one year. If you sell inherited property, report the transaction on Schedule D and enter the word INHERITED in column (b) as the date of acquisition.

Patent Property

If you dispose of patent property, you're generally considered to have held the property for more than one year no matter how long you held it.

Installment sale

Long term gain on an installment sale of an asset qualifying for long-term capital gain treatment in the year of sale, continues to be classified as long-term in later tax years.

Short-term gain in the year of sale continues to be classified as short-term when payments are received in a later tax year.

The date the installment payment is received determines the capital gain rate to apply not the date the asset was originally sold under the installment contract.

Profit-sharing Plans

If common stock is withdrawn from a qualified contributory profit-sharing plan the holding period begins on the day after the day the plan trustee delivered the stock to the transfer agent with instructions to reissue the stock in your name.

Corporate Liquidation

If a gain or loss is recognized from property received in a corporate liquidation, the holding period generally begins on the day after you receive it.

Real Property

To figure how long you held the property, start counting on the day after you received title to real property to figure your holding period, or, if earlier, the day after you took possession of it and assumed the burdens and privileges of ownership.

The holding period cannot start until there is an actual contract of sale. The holding period of the seller cannot end before that time. Taking possession of property under an option agreement is not enough to start a holding period.

Converting a Residence to Rental Property

If you convert a residence to rental property and later sell the home, the holding period includes the time you held the home for personal purposes.

The date of sale is the last day of your holding period even if you do not receive the sales proceeds until the following year.

Real property Repossession

Holding period begins day after date you originally received title to the property, but does not include the time between the original sale and date of repossession.

Nontaxable Trades

If you trade investment property for other investment property and your basis is the new property is determined by your basis in the old property, your holding period for the new property begins on the day after the date you acquired the old property.

Nontaxable Exchanges

The holding period begins the day after the date you acquired the old property.

Partnership Property

When you receive property as a distribution in kind from your partnership, the period your partnership held the property is added to your holding period.

However, if the partnership property distributed was inventory and was sold by you within five years of distribution, you do not add the period the partnership held the property to your holding period.

Involuntary Conversions

If you have an involuntary conversion and elect to defer tax on gain, the holding period for the qualified replacement property generally includes the period you held the converted property.

A new holding period begins for new property if you do not make an election to defer tax.

File your personal and small business taxes (Schedule C)