The time test is a term used primarily in the fields of taxation and investment. It represents the legally stipulated minimum period for which an individual must own a certain asset for the income from its sale to be exempt from income tax. The main purpose of this test is to encourage long-term investment and to limit short-term market speculation. In practice, this principle applies mainly to the sale of securities, such as stocks or mutual fund units, and to the sale of real estate that was not used as the owner's primary residence.
The specific length of the holding period test varies depending on the type of asset. In the Czech Republic, this period is three years for securities (stocks, mutual funds, ETFs). Fulfilling the conditions of the holding period test can save investors and property owners a significant amount of money in taxes, making it an important factor to consider when planning the sale of an asset.
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