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Discussion Starter #1
Does anyone know the rules of paying capital gains tax, and how to avoid paying a higher percentage on teh stock market? Also, do you have to pay a capital gains tax if you were to record a loss for the year?
 

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You pay a capital gains tax with your taxes, it depends on how much you profit from an investment (stocks, mutual funds, CGM, etc...).

No, a capital loss would not equate to capital gains...as in a gain is positive cash flow and a loss is negative cash flow. So no, you're not taxed...sometimes capital losses can be deducted though if they're not personal property.

But, really you can find all your answers on the IRS website...it's where I go for all my questions especially those relating to my finances that can or may be taxed.

http://www.irs.gov/faqs/faq10-2.html

10.2 Capital Gains, Losses/Sale of Home: Stocks (Options, Splits, Traders)

How do I figure the cost basis of stock that has split, giving me more of the same stock, so I can figure my capital gain (or loss) on the sale of the stock?

When the old stock and the new stock are identical the basis of the old shares must be allocated to the old and new shares. Thus, you generally divide the adjusted basis of the old stock by the number of shares of old and new stock. The result is your new basis per share of stock. If the old shares were purchased in separate lots for differing amounts of money, the adjusted basis of the old stock must be allocated between the old and new stock on a lot by lot basis.


References:

Publication 550, Investment Income and Expenses
Tax Topic 409, Capital Gains and Losses

How do I figure the cost basis when the stocks I'm selling were purchased at various times and at different prices?

If you can identify which shares of stock you sold, your basis is what you paid for the shares sold (plus sales commissions). If you sell a block of the same kind of stock, you can report all the shares sold at the same time as one sale, writing VARIOUS in the "date acquired" column of Form 1040, Schedule D (PDF). However, what you enter into the "cost or other basis" column is the total of all the acquisition costs of the shares sold.

If you cannot adequately identify the shares you sold and you bought the shares at various times for different prices, the basis of the stock sold is the basis of the shares you acquired first (first-in first-out). Except for certain mutual fund shares, you cannot use the average price per share to figure gain or loss on the sale of stock.

For more information, refer to Publication 550, Investment Income and Expenses.


References:

Publication 552, Recordkeeping for Individuals
Tax Topic 409, Capital Gains and Losses

How do we show on our tax return where dividends are reinvested?

Some corporations allow investors to choose to use their dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. If you are a member of this type of plan, you must report the fair market value on the dividend payment date of the dividends that are reinvested as income on your tax return. You do not actually show that the dividends were reinvested on your return. Keep records of the dollar amount of the reinvested dividends, the number of additional shares purchased, and the purchase dates. You will need this information to establish your basis when you sell the shares.

Report the dividends that were reinvested with your other dividends, if any, on Form 1040 (PDF) or Form 1040A (PDF). If your total income from ordinary dividends exceeds a dollar amount set by law, you also must file either Form 1040, Schedule B (PDF) or Form 1040A, Schedule 1 (PDF).

For more information on this and other types of dividend reinvestment plans, refer to Ordinary Dividends in Chapter 1 of Publication 550, Investment Income and Expenses and Tax Topic 404, Dividends.



How do I compute the basis for stock I sold, when I received the stock over several years through a dividend reinvestment plan?

The basis of the stock you sold is the cost of the shares plus any adjustments, such as sales commissions. If you have not kept detailed records of your dividend reinvestments, you may be able to reconstruct those records with the help of public records from sources such as the media, your broker, or the company that issued the dividends.

If you cannot specifically identify which shares were sold, you must use the first-in first-out rule. This means that you deem that you sold the oldest shares first, then the next oldest, until you have accounted for the number of shares in the sale. In order to establish the basis of these shares, you need to have kept adequate documentation of all your purchases, including those that were made through the dividend reinvestment plan. You may not use an average cost basis. Only mutual fund shares may have an average cost basis.

Refer to Publication 550, Investment Income and Expenses, and Publication 551, Basis of Assets.



How do I report participation in an employee stock purchase plan on my tax return?

If you participated in an employee stock purchase plan, you do not include any amount in your gross income as a result of the grant or exercise of your option to purchase stock. When you sell the stock that you purchased by exercising the option, you may have to report compensation and capital gain or capital loss. For additional information on tax treatment and holding period requirements, refer to Publication 525, Taxable and Nontaxable Income.



I purchased stock from my employer under an employee stock purchase plan. Now I have received a Form 1099-B from selling it. How do I report this?

If the special holding period requirements described below are met, the sale of stock is treated generally as capital gain or loss. However, you may have compensation income if:

The option price of the stock was below the stock's fair market value at the time the option was granted, or
You did not meet either or both of the holding period requirement.

The holding period requirements are that you must hold the stock for more than 2 years from the time the option is granted to you and for more than 1 year from when the stock was transferred to you. If you do not meet either or both of these holding period requirements there is a disqualifying disposition of the stock. The compensation income that you should report in the year of the disqualifying disposition is the excess of the fair market value of the stock on the date the stock was transferred to you over the amount paid for the shares. .

If the holding period requirements are met, but the option exercise price is below the fair market value of the stock at the time the option was granted, you report the discount as compensation income (wages) when you sell the stock. Generally, this compensation income is the lesser of the excess of the fair market value of the stock on the date of the disposition over the exercise price OR the excess of the fair market value of the stock at the time the option was granted over the exercise price.

If the holding period requirements are met and your gain is more than the amount you report as compensation income, the remainder is a capital gain reported on Form 1040, Schedule D (PDF). If you sell the stock for less than the amount you paid for it, your loss is a capital loss, and you do not have ordinary income.

For more information, refer to Publication 525, Taxable and Nontaxable Income, and Publication 551, Basis of Assets.



Should I advise the IRS why amounts reported on Form 1099-B do not agree with my Schedule D for proceeds from short sales of stock not closed by the end of year?

If you are able to defer the reporting of gain or loss until the year the short sale closes, there are certain notations you can make on you Form 1040, Schedule D (PDF), Capital Gains and Losses that will allow you to reconcile your Form 1099-B (PDF) to your Form 1040, Schedule D (PDF) and still not recognize the gain or loss from the short sale. Include your name as it appears on the return and your social security number.



For more on these rules and the rules for put options and wash sales refer to Chapter 4 of Publication 550, Investment Income and Expenses.


References:

Tax Topic 409, Capital Gains and Losses

Do I need to pay taxes on that portion of stock I gained as a result of a split?

No, you generally do not need to pay tax on the additional shares of stock you received due to the stock split. You will need to adjust basis per share basis of the stock. Your overall cost basis has not changed, but your per share basis has changed.

You will have to pay taxes if you have gain when you sell the stock. Gain is the amount by which the proceeds from the sale, minus sales commissions, that exceeds the adjusted basis of the stock sold.


References:

Publication 550, Investment Income and Expenses
Tax Topic 409, Capital gains and losses
 

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You don't pay if you record a loss for the year.

Short term cap gains are taxed at your top tier for income taxes (so if you pay 25% on the top tier, it is taxed at 25%). Short term cap gains is anything held less then 1yr (this can include dividends that were acquired within the year, even if you had the stock for more then 1yr).

Long term cap gains are taxed at 15%.

If you record a loss for the year, you can carry that loss over to future tax returns. So if you say had a $4,000 loss in one year and 1,500 in cap gains from other stocks, you can write off all $1,500 in gains and then carry over the remainder of the $4,000 loss to next year (so you would have a $2,500 write off the next year on any cap gains you would have).

Basically if you want to pay the least taxes, hold the stock/mutual fund for at least 365 days (366 in a leap year).
-Matt
 

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Discussion Starter #4
Thanks guys. We have a book at work that is inaccurate. It had short term gains at 20% and someone else told me it was 30%. I've had about $900 in recorded losses (had a couple stocks go belly up on me), and then I have an unrealized gain at the moment that isn't too bad. Trying to figure out how long I'm gonna ride them out before I let them go. Also I'm trying to put my cap gain cost to the side so I don't spend it. Then I will at least have it to show when I file it on my taxes. Recording such a loss was horrendous, but oil shot up right at about the time I got in these stocks and I just got murdered. That's why I went into oil and left those "dollar" stocks alone, until the market flips back over.
 

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Discussion Starter #6
I think right now I pay about 23% in taxes.
 

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Discussion Starter #7
I would love to see the capital gains rate go back down to 20% or 15%.
 

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[quote author=weezerfan84 link=topic=116332.msg2432915#msg2432915 date=1214941080]
I would love to see the capital gains rate go back down to 20% or 15%.
[/quote]

as would i. i do all my investing in tax sheltered accounts, so all that extra revenue would go a long way in reducing the national debt.

now, would those cap gains be the same ones you were gonna use to buy that bike?
 

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Discussion Starter #10
Have some oil and gas stocks that have really paid off. I have one that I'm up 215% and another one up 11%. They are HUSA and EGY respectively.
 

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I had been holding INT for awhile. I lucked out, I held it for a bit over a year. When I bought it at around $35 a share it dropped to something like 28 and I was kicking myself, it quickly shot up around $60 a share and I sold it at around $50 a share before it skidded to where it is now (around $22 a share). Sadly I only had about a $1,200 original investment, so its not like dollarwise I made out all that well.
-Matt
 

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I'm not a fan of playing the market with short-term gains, it's not enjoyable and you'll end up screwing yourself over a few times. Better to leave it all in for a long time and take out small amounts as needed.

HUSA was historically in the $3 range for a long time...they must be over $10 now? That's not a bad jump...

Vaalco is a small player but they produce crude and that's where the money is right now...my dad did quite a bit of work with them when he was at Texaco.
 

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Discussion Starter #13
I bought 250 shares of HUSA at $4.80 and 250 shares of EGYat $7.58. Not making a lot on EGY but I have earnings next month and it shoot up past $9-9.50/share by then if it hadn't already. HUSA was dumb luck really. I bought it and rode it to $4.20/share and it's been bullish since April. I have a buddy who picks all my stocks to purchase and he's only been wrong once and I sold it for about a $50-60 loss. I've picked a few that I look at, but are a little more pricey than I would like to pay for. I also own 2500 shares of ECPN that I'm up $150 in. Found it on a 52 week low last week at $.08 and I bought it the next day at $.09, and now it's at $.13-.14/share. Took a risk on it, because it was only like $250 for 2500 shares or actually a little less than that.

I also think WM could be a good buy for a short term hold to ride to $6-6.50. Market has been up the last 2 days and could be a sign that it could rally a little bit. It hasn't been up but only 30 pts combined for 2 days, but today it was also down over 160 pts.
 

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I'd hold off on buying stock in banks and financial institutions right now...they never increase drastically and with decreased consumer spending along with the stagnant economy I wouldn't expect a huge rise out of one.
 

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Discussion Starter #15
[quote author=TEXNTHREE link=topic=116332.msg2432999#msg2432999 date=1214943152]
I'd hold off on buying stock in banks and financial institutions right now...they never increase drastically and with decreased consumer spending along with the stagnant economy I wouldn't expect a huge rise out of one.
[/quote]

I ABSOLUTELY agree, but for a couple of days hold through Thursday could pay off for someone who can make a large purchase. It's not going to have any long term success, but if you can throw some money at it, it could make you a C note or two from a $2k initial investment. I wouldn't do it, but there's people out there that do.
 

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I guess we could use another old Volvo turbo...maybe a wagon this time. :p

Cause I really have no other big purchases I want/need to make, or that my income won't support.
 

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Discussion Starter #17
[quote author=TEXNTHREE link=topic=116332.msg2433031#msg2433031 date=1214943707]
I guess we could use another old Volvo turbo...maybe a wagon this time. :p

Cause I really have no other big purchases I want/need to make, or that my income won't support.
[/quote]

I'm confused on what you're saying here.
 

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Discussion Starter #18
SBUX made a new 52 week low today just like I predicted it would a couple months ago. That franchise is in trouble only because every fast food chain around is selling coffee for a lot cheaper price, that isn't "half bad."
 

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[quote author=weezerfan84 link=topic=116332.msg2433052#msg2433052 date=1214944190]
[quote author=TEXNTHREE link=topic=116332.msg2433031#msg2433031 date=1214943707]
I guess we could use another old Volvo turbo...maybe a wagon this time. :p

Cause I really have no other big purchases I want/need to make, or that my income won't support.
[/quote]

I'm confused on what you're saying here.
[/quote]

Buying and selling stocks to buy stuff. I could do a quick investment and go buy another old Volvo. I took my stimulus check and bought one in June. haha
Little lady didn't appreciate that one too much, but her car was dying.
 

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I would suggest a Roth IRA, especially for those that typically max out their 401k contributions each year...
 
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