Quiz: Do you know How the Capital Gains Tax Works?
by Staff
Most Americans have a healthy fear of the Internal Revenue Service. We all want to know how to reduce our income tax, including the dreaded capital gains tax. This quiz will help you navigate the slippery slopes the capital gains.

You are charged capital gains tax when you _____ an asset.

  • buy
  • sell
  • keep

If you have a capital gain, your selling price is __________ your purchase price.

  • lower than
  • higher than
  • the same as

The capital gains tax applies to any money earned from __________.

  • stocks
  • real estate
  • both of the above

Which of the following types of income is investment income?

  • stock dividends
  • real estate trusts
  • both of the above

Which type of proceed indicates how much you earn before deducting any commissions or fees?

  • net
  • gross
  • final

Which 1997 United States tax law governs tax breaks on capital gains?

  • Taxpayer Income Act
  • Taxpayer Relief Act
  • Taxpayer Real Estate Act

In America, how much money can married couples exclude in capital gains from the sale of their home?

  • 2173-10-13 23:00:00
  • 2447-07-29 23:00:00
  • 3268-12-11 23:00:00

What is the original purchase price of an investment called?

  • purchase basis
  • tax basis
  • cost basis

What is the cost basis of an investment you receive as a gift?

  • original price of the gift
  • original price of the gift plus 10 percent
  • original price of the gift less 10 percent

What is the term for the period in which you've owned an asset?

  • waiting period
  • holding period
  • investing period

Investments that are sold less than a year after they were bought are known as what?

  • short-term
  • long-term
  • super-long-term

How long must super-long-term investments must be held after the original purchase?

  • three years
  • four years
  • five years

Which factor is the most important in determining your capital gains tax on a given asset?

  • your age
  • your income tax bracket
  • your gender

Capital gains tax on short-term investments is usually _________ long-term investments.

  • lower than
  • higher than
  • the same as

Taxpayers in the 15 percent tax bracket will pay ________ on long-term capital gains.

  • 5 percent
  • 20 percent
  • 50 percent

What is the long-term capital gains rate for collectible items?

  • 8 percent
  • 18 percent
  • 28 percent

In the U.S., which tax form do you use to report capital gains and losses?

  • Schedule C
  • Schedule D
  • Schedule F

Which type of investment will help you save on your capital gains tax bill?

  • short-term
  • long-term
  • super-long-term

Can you deduct a capital loss from your income to reduce your total taxable income?

  • no
  • yes
  • only under special circumstances

What's a legal way to avoid paying high capital gains tax ?

  • Invest in tax-deferred retirement accounts.
  • Put your money in numbered Swiss bank accounts.
  • Gift your gains to your dependents.