These gains don't cause pain. A capital gain is the amount of money you pocket by selling one of your investments for more than you paid for it. Technically, capital gains only count for what's called a capital asset, but that's really just anything you own for investment purposes. Stocks and bonds obviously qualify, but your house and household furnishings can also count.

For tax purposes, capital gains are classified as either long-term (held for more than one year) or short-term (held for less than one year) and there are different tax implications for how long you hold onto a capital asset. For most long-term capital gains, you're taxed no more than 15% of the value of the asset. Short-term gains get taxed as regular income, so you pay the rate for the tax bracket you're in.

Capital gains can also be realized or unrealized. When you physically sell an asset like a stock, you've realized the capital gain. When you're holding the stock, and it has a value over its purchase price, but you're not selling it, you've got an unrealized gain, and you won't realize it until you sell.

In a perfect world, we'd all have capital gains. But no one¿s that smart or lucky. When the value of an asset at sale is below what you've paid for it, it's called a capital loss. The good news is that the government lets you count that loss against any gains you've had, lowering the taxes you pay. In fact, many people who sell a stock that has risen far over their purchase price tend to sell some stinkers, too, at the same time for the tax benefit. This is known as a capital-loss offset.

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Tuesday, July 22, 2008

Oil Tumbles as Hurrican Fears Ease

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Associated Press

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Oil prices tumbled Tuesday, falling about $4 a barrel as concerns eased about possible supply disruptions from Tropical Storm Dolly.

The sell-off, which came with the existing futures contract set to expire, was a throwback to last week's sharp declines and dragged crude to its lowest trading level since early June.

Light, sweet crude for August delivery fell $3.80 at $127.24 a barrel on the New York Mercantile Exchange. Earlier, the contract dropped as low as $126.26.

The declines offered further evidence that investors who only a week and a half ago drove prices to a new record above $147 a barrel are now pulling money out of the market. There are also indications that the price of oil is killing demand, especially in the U.S., which consumes far more oil than any other country.

"This is more of the long exit from the market by the hedge funds," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "A lot of these investors who have been supporting prices are hitting the road"

Prices rose Monday as Tropical Storm Dolly bore down on oil and gas installations in the Gulf of Mexico, but that did little to dent the steep declines left over from last week's sell-off.

Forecasters at the National Hurricane Center in Miami say it is likely Dolly will become a hurricane, but they do not expect it to become a major hurricane.

By morning in the U.S., the storm's center was about 265 miles southeast of Brownsville, Texas. It was moving west-northwest at around 13 mph and winds were expected to strengthen Tuesday to hurricane force, which would mean at least 74 mph.

"The market had a rally yesterday based on concerns about the storm," Ritterbusch said. "Most people I knew were looking for a stronger price rally. When we can't muster up much steam, a lot of these hedge funds are just dumping their long positions."

Other energy commodities were also down sharply. Natural gas is trading below $10 per 1,000 cubic feet for the first time since April.

Retail gas prices continue to fall away, with the cost for a gallon of gas falling more than a penny overnight to $4.055, according to AAA, the Oil Price Information Service and Wright Express.

It is the first time since January that gas has fallen for two consecutive weeks, according to analyst and trader Stephen Schork. Still, a gallon of gas still costs 30% more than it did last year, or more than 80 cents, he said.

In other Nymex trading, natural gas futures dropped 51.4 cents to $9.996 per 1,000 cubic feet. Heating oil sank 7.47 cents to $3.6732 per gallon, while gasoline futures tumbled 9.31 cents to $3.124 per gallon.

In London, September Brent fell $3.74 to $128.89 a barrel on the ICE Futures exchange.