Capital gains

The gain is measured against the basis, whatever the asset was worth on any other day. A share bought at $80 and sold at $100 has a $20 gain. A sale below the basis produces a capital loss.

A gain exists only when the asset is sold. A holding that has risen has an unrealized gain, which is not income and is not taxed; the sale realizes it. The IRS counts the gain in the year the sale happens, not the year the price moved.

The one-year line runs per lot. A holding bought in several purchases is several lots, each with its own basis and its own date, so one sale of a hundred shares can produce a long-term gain on some of them and a short-term gain on the rest. Short-term gains are taxed as ordinary income; long-term gains are taxed at the long-term capital gains rates, which are set separately from the ordinary rates. Shares from equity compensation follow the same rule from their own start dates, and ESPP and ISO shares carry a second test on top of it.

A fund is held in two lots: 50 shares bought on March 3, 2025 at $80, and 50 shares bought on February 10, 2026 at $95. All 100 shares are sold on September 15, 2026 at $100.

The first lot was held more than a year, so its $1,000 gain is long-term. The second was held seven months, so its $250 gain is short-term. The sale is one order and $10,000 of proceeds, but the two gains are reported separately, because each lot has its own basis and its own date.

Lot 1 sale, 50 sh × $100

$5,000

Lot 1 basis, 50 sh × $80

− $4,000

Long-term gain, held 18 months

$1,000

Lot 2 sale, 50 sh × $100

$5,000

Lot 2 basis, 50 sh × $95

− $4,750

Short-term gain, held 7 months

$250

Capital gain on the sale

$1,250

The tax is on the gain. In the example $10,000 changes hands and $1,250 is income; without the basis the whole $10,000 would read as gain.

The term sets which rates apply, and the term is decided by the lot's date, so which lots a sale comes from decides the tax on it. A broker sells the oldest lots first unless specific shares are identified before the sale.

Losses net against gains. A capital loss realized in the same year reduces the gain that is taxed, which is the mechanism behind tax-loss harvesting.

In Taiga Finance a holding's drawer in Investments shows a “Lots” table, one row per purchase, with “Acquired”, “Shares”, “Value”, “Gain $” and “Term”. Gain $ is the lot's current value minus its cost, signed, and Term reads “LT” once the lot has been held more than a year and “ST” before that. It is the unrealized gain on shares still held: the Investments ledger records no sales and shows no realized gain, no tax rate and no tax owed. A lot whose cost is unknown reads “Unknown” under Acquired, “—” under Gain $ and “?” under Term.

Two other surfaces price a realized gain. In Equity Comp, a recorded sale of an ESPP lot or an exercise lot reads “LT gain” or “ST gain” on its row, with the ordinary-income part beside it on an ESPP or ISO lot. An imported crypto ledger shows “Realized P&L (YTD)”, “Realized gains YTD” and “Realized losses YTD”, and an “Estimated tax” at a marginal rate typed in, marked as a flat-rate approximation that does not separate short-term from long-term.