Lesson: Gains and Losses

In this lesson, Nick Palazzolo, CPA, breaks down the basics of gains and losses, which are crucial components of gross income for individual taxpayers. He clarifies how gains and losses are typically derived from the sale or exchange of assets like stocks, real estate, and other valuables, and the effect they have on a person's tax obligations. Focusing on the critical differences between trade and settlement dates, Nick illustrates the importance of the trade date in determining the holding period and tax implications of any gains or losses incurred. Delving into how gains and losses are netted and how this netting influences gross income, he ensures to clarify why losses are not simply deductions. Furthermore, Nick explains the concepts of realization and recognition in the context of taxation, setting up the groundwork for a more detailed exploration in a subsequent lesson.