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Capital Gains and Losses
Capital gains occur when an asset is sold for more that it was purchased for while capital losses occur when an asset is sold for less than it was purchased for (IRS, 2015). Tax payers are legally obligated to report all capital gains, and pay tax on the net total of their capital gains based on their tax bracket and the length of time the capital asset was held. However, it is up to the tax payer to decide whether or when they should realize a capital gain, and in this sense the tax on capital gains is considered a voluntary tax. This is because while a tax payer has a legal obligation to report all capital gains, and thus pay tax on their capital gains, the timing of whether and when to realize a capital gain is entirely up to the tax payer....
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