Schedule D is used to report short and long term, gain or loss from capital assets such as stocks, bonds, house, furniture, and cars.  Becoming familiar with Schedule D can provide better understanding of when to sell assets, what constitutes a short-term investment, what constitutes a long-term investment, and how to compute gain or loss from the sale of capital assets.  This information can be very useful in managing an investment portfolio and making investment decisions.

Non-capital assets

Assets can be categorized as passive investments or active investments.  Assets held as active investments are usually used in a trade or business and would be reported on the applicable tax turn for the type of business, i.e. sole proprietorship, corporation, or partnership.

• Stock, commodities, derivatives, and hedging transactions used in a trade or business that is included in inventory because such assets are held for the purpose of selling to customers;
• Real estate used in a trade or business;
• Patents, inventions, copyrights, literary, musical, or artistic compensations created by personal efforts; and
• Accounts and notes receivable used in a trade or business.

Recordkeeping

It is important to maintain books and records that can be used to compute gain or loss.  Important elements to know regarding investments is date acquired, purchase price, date sold, sale price, cost and fees to acquire then sale the investment.  Maintaining books/records from the purchase date through the sale date can make it easier to identify and resolve differences in records received from other parties to the transaction and make completing Schedule D much easier.