How do you reconcile capital gains and losses on your tax return? It's a little more complicated than just adding them all together. You'll have to "net" long-term gains and losses separately from short-term gains and losses. Then you'll net the long result with the short result. Consider this amusing example from an article that Fool community member Peter Thelander wrote on our website:

"Long John Silver sold two stocks so far this year. Both were held for more than a year, so they are long-term items. Long John had a gain of $1,000 on his investment in BadCatch.com -- an Internet startup selling trout and salmon online to unlucky fisherman--and a $600 loss on Fish-R-Us -- a retailer of fish-shaped toys for kids. Subtract the loss from the gain and we find that he has a net $400 long-term gain.

"Now, let's say that he sells two more stocks before year-end. His investment in Mackerel Industries has turned out to be a real stinker. So, he unloads it for a $300 short-term loss. And, Minnow, Inc. turned a small short-term gain of $50. Net these two items together, and Long John has a $250 short-term loss.

"Finally, we net the short-term items with the long-term items and find that Long John has a net $150 long-term gain."

For a more detailed summary than the one above, read the full article. And for more tax guidance in general, drop by our Tax Strategies discussion board, which features many questions and answers.