In the context of capital gains tax, the holding period of an asset is crucial in determining whether the capital gain or loss is classified as long-term or short-term. For example, if an investor purchases shares and sells them after holding them for more than a year, the gains from the sale are typically subject to a lower tax rate as long-term capital gains.
Our financial advisor emphasized the importance of the holding period for our stock investments to take advantage of lower long-term capital gains tax rates.
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