What defines a long-term holding period for capital assets?

A long-term holding period for capital assets is defined as being held for greater than 12 months. This designation is significant for tax purposes, as long-term capital gains are typically taxed at lower rates than short-term capital gains. Investors benefit from this classification when they sell an asset that they have held for more than one year, as the tax implications differ significantly, promoting longer-term investment strategies. The 12-month threshold is a key factor in determining the treatment of capital gains on tax returns, allowing taxpayers to plan their selling strategies accordingly to optimize tax outcomes. This distinction encourages investors to hold their investments longer in hopes of achieving greater returns while also benefiting from favorable tax rates.