FINRA Series 7Investment Information and Suitable RecommendationsEasy
A client purchased 100 shares of ABC stock on March 1, Year 1. To qualify for long-term capital gains tax treatment, the earliest date the client could sell the shares would be:
- AAugust 1, Year 1
- BMarch 1, Year 2
- CDecember 31, Year 1
- DMarch 2, Year 2
Show answer & explanationAnswer & explanation
Correct answer: D. March 2, Year 2
To receive long-term capital gains treatment, a security must be held for more than one year. Since the shares were purchased March 1, Year 1, the holding period exceeds one year starting March 2, Year 2.
Why the other options are wrong
- A. This is only five months of holding, well short of the required period.
- B. Selling on this exact date is exactly one year, which is still short-term.
- C. This is less than one year from purchase.
Long-Term Capital Gains Holding Period
A security must be held for more than one year (one year plus one day) to qualify for preferential long-term capital gains tax rates.
- Exactly one year = short-term
- One year + 1 day = long-term
- Holding period starts the day after purchase
Memory trick: 'One year isn't enough — add a day for long-term.'