Gains are determined using the tax basis of your investments. The tax basis is the original cost you paid for the investment (plus expenses) that must be reported to the IRS when you sell the investment. The basis is used for calculating capital gains or losses. For example, if you bought a stock for $1,000 two years ago and sold it today for $1,500, your income tax return would show a basis of $1,000 and a taxable capital gains profit of $500.
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Taxes are assessed in the year you sell the investment.
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