Capital Gains and Investment Taxation

A capital gain arises when you sell a capital asset — stocks, bonds, real estate, collectibles, cryptocurrency — for more than your cost basis (what you paid for it, adjusted for commissions, stock splits, and improvements). The taxable gain is the sale price minus the cost basis. If you sell for…

Tax-loss harvesting is the deliberate sale of investments with unrealised losses to realise a capital loss for tax purposes, using that loss to offset other capital gains and reduce the current year's tax bill. The investor then reinvests the proceeds in a similar (but not identical) asset to…

Cost basis is what you paid for an asset, adjusted for certain events over time. For a stock purchased at $10, the basis is $10 per share. If the company pays a stock dividend or the investor reinvests dividends, the basis adjusts accordingly. When you sell the asset, your taxable gain or loss is…

Asset allocation is the decision about how much of each asset class to hold — 60% stocks, 30% bonds, 10% alternatives. Asset location is the separate decision about which account type should hold which assets. Most investors focus intensely on allocation and neglect location — yet location can add…