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Profit (or loss) from the sale of a capital asset, such as stock received at a distribution from a nonqualified deferred compensation plan or from restricted stock units with deferral of share delivery. Capital gains may be short-term (held 12 months or less) or long-term (held more than 12 months). Capital losses are used to offset capital gains to establish a net position for tax purposes. Only $3,000 of net capital losses can be deducted in any one year with the remaining balance carried over to future years indefinitely. The top rate of long-term capital gains tax is 15%. If you are in the 10% or 15% bracket for regular-tax purposes, your capital gains rate is 0% through 2010. The respective rates are scheduled to return to 20% and 10% in 2011. Short-term capital gains are taxed at the rates of wages and other ordinary income. You must file Schedule D, Capital Gains and Losses, with your federal IRS Form 1040 tax return for any tax year in which you sell stock, regardless of whether you have a capital gain.