A loss in the business world is the opposite of profit - the company does not make enough revenue in a year to cover its annual expenses. It's sometimes called an operating loss to distinguish it from a capital loss on investments. Traders and investors can sometimes turn capital losses to their own advantage by using them to offset tax liabilities.
The good kind
Because short-term capital gains - those made in less than a year - are taxed at a higher rate than long-term gains, market investors often try to offset these tax liabilities by selling other securities at a deliberate loss to restrict their overall short-term gain. This practise is usually called tax-loss harvesting or tax-loss selling. Such capital losses are also determined by the tax basis of the securities or assets sold.
- ↑ Tax Gain/Loss Harvesting. Investopedia - Forbes Digital.
- ↑ How much of a capital loss can I deduct on my tax return. WWWebtax.com.