“Holding period” refers to the length of time you own stock or mutual funds shares before you sell them. Holding periods can be either short-term or long-term. If you hold the shares for a year or less, it’s considered a short-term holding period. A long-term holding period is one in which you hold the shares for more than 1 year.
The clock starts running the day after you purchase the shares, or the day after the trade date. And it stops running on the day you sell the shares, or the trade date. So, for example, if your trade date for purchasing the shares was March 15, 2006, then you start counting the time from March 16. Your holding period remains short-term through March 16, 2007. However, on March 17, 2007, your holding period becomes long-term.
Special rules apply if the shares you sell were given to you as a gift or you received them as an inheritance. If the shares were a gift, then your holding period includes the time they were held by the person who gave them to you. If you inherited the shares, then your holding period is always long-term — no exceptions.