You bought 1,000 shares of Tund Corp. stock for $68.12 per share and sold it for $90.03 per share after a few years. How will your gain or loss be treated when you file your taxes?

As a capital gain taxed at the long-term tax rate

As a capital gain taxed at the current ordinary-income tax rate

The gain will be treated as a capital gain taxed at the long-term tax rate.

Explanation:

Capital gain tax is paid on profit derived from selling an investment asset, like stock or bond. Under the tax law, capital gain can be taxed either at a long-term tax rate or current ordinary-income tax rate.

For a capital gain to be taxed at the long-term tax rate, the investment must have been held for more than one year and above. The tax rate under the long term range from 0% to 20%.

For the a capital gain to be taxed at the current ordinary-income tax rate, the investment must be held less than one year. When this occur, the capital gain is taxed at the ordinary income tax rate because the gain is assumed to be part of the taxable income for the year.

In the case of Tund Corp, the capital gain will be taxed at long term tax rate of 0% to 20% because the investment is held more than a year.