Determination of Net Long-Term and Short-Term Gains or Losses

What this video covers

• Why the Internal Revenue Service (IRS) requires net short-term against short-term and long-term against long-term first, before any cross-category netting
• The four-step netting process in strict order: within short-term, within long-term, separate taxation if both are gains, then net across if mixed
• Why character follows the larger absolute amount, not whichever side was a gain, when netting across categories
• How two net gains stay separate forever: short-term taxed at ordinary rates, long-term at preferential rates, never combined
• How to apply the $3,000 annual deductible loss limit and what happens to excess losses (carryforward)
• The most common exam trap: throwing all gains and losses into one blender instead of the required two-step within-category process
• How to read a real four-transaction example and predict the final dollar amount, character, and tax rate