J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

5.10 Holding Period for Securities

Rules for counting your holding period for various securities transactions are as follows:

- - - - - - - - - -

Planning Reminder

Long-Term Holding Period of More Than a Year

To obtain the benefit of favorable long-term capital gains rates (5.3), you must hold an asset more than a year before selling it.

- - - - - - - - - -

Stock sold on a public exchange.

The holding period starts on the day after your purchase order is executed (trade date). The day your sale order is executed (trade date) is the last day of the holding period, even if delivery and payment are not made until several days after the actual sale (settlement date).

EXAMPLES

1. On June 3, you sell a stock at a profit. Your holding period ends on June 3, although proceeds are not received until June 6.

2. You sell stock at a gain on a public exchange on December 31, 2012. The gain must be reported in 2012 even though the proceeds are received in 2013. The installment sale rule does not apply; see 5.21.

Stock subscriptions.

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

Tax-free stock rights.

When you exercise ...