Define Short-Term versus Long-Term Capital Gains in the Context of Derivatives

Short-term capital gains or losses result from the disposition of a capital asset held for one year or less. These gains are taxed at the taxpayer's ordinary income tax rate, which is typically higher.

Long-term capital gains or losses result from assets held for more than one year and are taxed at preferential, lower rates. This distinction is crucial for non-Section 1256 derivatives.