The holding period is the length of time you own property before you sell it. If you hold property for a year or less, short-term capital gain or loss rules apply. If you hold property for more than a year, long-term capital gain or loss rules apply.

For stock, the holding period:

• Begins the day after you purchase the shares, or the day after the trade date
• Ends the day you sell the shares, or the trade date

Ex: Jim purchased shares of stock on March 15, 2011. His holding period began March 16. His holding period remained short-term through March 16, 2012. However, on March 17, 2012, his holding period became long-term.

Special rules apply if you received the shares you’re selling as a gift or an inheritance. If the shares were:

• A gift - Your holding period includes the time the person who gave you the shares held them. However, if the donee's basis is the fair market value at the date of the gift, your holding period of the gifted stock will begin the day after you received the gift.
• An inheritance - Your holding period is automatically considered to be more than 1 year. So, when you sell the inherited stock  regardless of the actual holding period  it's subject to long-term capital treatment.