What tax form is used to report capital gains and losses?

• A. Form 1040
• B. Schedule C
• C. Schedule D (Form 1040)
• D. Form W-2

Answer: (C)

The correct form used to report capital gains and losses is Schedule D (Form 1040). This schedule is specifically designed to detail capital assets transactions, such as stocks, bonds, and real estate, allowing taxpayers to calculate their total capital gains and losses for the tax year. Schedule D helps in determining how much of the capital gains are taxed and whether they can offset any capital losses, thereby impacting the overall tax liability.

Form 1040 is the main income tax return form that taxpayers file, but it does not provide the specific details about capital gains and losses, which is why Schedule D is required. Schedule C is utilized for reporting income and expenses from self-employment activities, focusing on business profits rather than individual investment gains. Form W-2 is used by employers to report wages paid to employees and the taxes withheld, making it irrelevant for capital gains reporting. Thus, Schedule D fits the needs for specifically accounting for capital gains and losses on the taxpayer's overall income tax return.