Capital Gains Question

[hhiusa]

EX. 1
2016-02-01
I have $10,000. I invest $10,000 100 shares @ $100 in XYZ
2016-02-02
I sell 100 shares XYZ @ $90. I now have $9,000
2016-04-01
I buy 100 shares ABC @ $90.
2016-04-02
I sell 100 shares ABC @ $110. I now have $11,000.

I am going to a tax guy later. That is besides the point.

My initial investment was $10,000. I now have $11,000. ($11,000-$10,000) = $1,000 gross income. But, what about my short-term loss in XYZ? Is $1,000 my gross income and do i get to deduct the XYZ loss?

I read that you add you short-term gain/loss separately from long-term gain/loss. Hypothetically, I would have no long-term gain.

$2,000 gain
($1,000) loss
$1,000 short-term gain.

In my way of thinking about it, I should have a $1,000 gross income and should be able deduct my loss in XYZ because I made $1,000 in spite of losing $1,000.

 

[xandman]

ST and LT are calculated in different buckets.

Using hypothetical rates:

Your marginal tax bracket is 10% because your living on food stamps.
The capital tax rate for all is 30% not counting a special bracket for guys on food stamps.

ST loss $1000 x .10 is: $100 subtracted from taxes due to IRS
LT gain $2000 x 30% is: $600 added taxes due to IRS
Total due to the IRS is: $500

The point is that they are calculated in different buckets. And, if you take this as valid tax advice. You have another thing coming!

 

[Bob111]

https://www.interactivebrokers.com/webinars/NewKidsWebinar_Form8949.pdf

why do you need it? if you do taxes yourself-software will do that for you. if tax man doing your taxes-he will do it for you. it's all will be in forms before Apr 15

 

[hhiusa]

https://www.interactivebrokers.com/webinars/NewKidsWebinar_Form8949.pdf

why do you need it? if you do taxes yourself-software will do that for you. if tax man doing your taxes-he will do it for you. it's all will be in forms before Apr 15

I do not necessarily need it. I should have pointed that xandman did not seem to understand--the point of a hypothetical. The mention of food stamps was pointless. Capital gains in not 30%.

I have someone that does my corporate taxes already. I should have pointed out that this is for a C-corp. I suppose I oversimplified my question. The $10,000 could have been $10,000,000. I am not concerned with tax brackets or the total due to the IRS.

I am looking for someone to explain the tax code in that particular instance not tell me which form to fill out.

The situation I described below differs from the scenario involving a wash trade. If I had reinvested in XYZ instead of ABC, I would not be write off the loss. Can someone explain (in detail) how the presence or lack thereof in the both example would effect net income.

I could ask my tax laywer at a cost. LOL

 

[hhiusa]

I could have been confused, but I could have sworn that I chatted with someone from IB and they told me they did not report my trades to the IRS. I can't imagine the feasibility of say, TDAmeritrade reporting every trade of every customer (7 million) no matter how small the amount to the IRS. ???

 

[xandman]

I think you are starting to entertain ideas that you shouldn't.

 

[Bob111]

I think you are starting to entertain ideas that you shouldn't.

yep


IB guy is correct. and you are not
https://www.irs.gov/businesses/small-businesses-self-employed/cost-basis-reporting-faqs

Starting in tax year 2011, brokers must report the adjusted basis and whether any gain or loss on a sale is classified as short-term or long-term from the sale of "covered securities" on Form 1099-B.

broker does not report every trade. they report BASIS cost. i did mentioned form above for a reason.
saying that you have C corp is not enough. but it doesn't matter either.

Generally, all for-profit corporations are automatically classified as a C corporation unless the corporation elects the option to treat the corporation as a flow-through entity known as an S corporation.

https://en.wikipedia.org/wiki/C_corporation

your gains will offset your losses. end of story.

you made 100, then you lost - 50=your total taxable gain is $50. just like in your example. how complicated is that? you not deducting anything. deduct your corp costs of having business.
if you buy,sell then buy and sell again same security within 30 days-second trade will be flagged as a wash sale. read about that here:

http://www.investopedia.com/terms/w/washsalerule.asp?lgl=no-infinite

 

[Sig]

EX. 1
2016-02-01
I have $10,000. I invest $10,000 100 shares @ $100 in XYZ
2016-02-02
I sell 100 shares XYZ @ $90. I now have $9,000
2016-04-01
I buy 100 shares ABC @ $90.
2016-04-02
I sell 100 shares ABC @ $110. I now have $11,000.

I am going to a tax guy later. That is besides the point.

My initial investment was $10,000. I now have $11,000. ($11,000-$10,000) = $1,000 gross income. But, what about my short-term loss in XYZ? Is $1,000 my gross income and do i get to deduct the XYZ loss?

I read that you add you short-term gain/loss separately from long-term gain/loss. Hypothetically, I would have no long-term gain.

$2,000 gain
($1,000) loss
$1,000 short-term gain.

In my way of thinking about it, I should have a $1,000 gross income and should be able deduct my loss in XYZ because I made $1,000 in spite of losing $1,000.

Just because I don't think you've received a straight answer on this yet...You have a short term capital gain of $1000 that is taxed at your ordinary income rate.

You net all your short-term gains and losses together so the total you're ahead or behind is your total gain/loss.
The long vs short term gain and loss can be made more confusing than they are. Essentially you first net like losses against like gains, i.e. your short-term losses against your short term gains and your long-term losses against your long-term gains. Then any additional losses can carry over to any non-like capital gains, i.e. you could offset long-term gains with short-term losses Any left-over loss can be applied to ordinary income but only a small amount per year, $3,000 per year right now.
For example, you had $5,000 in short term gain and $10,000 in long-term gain. You had $1,000 in short-term losses and $12,000 in long-term losses. You would apply the $1000 st loss to the st gain, leaving you at a $4,000 st gain. You would apply $10,000 of the lt loss against the lt gain leaving you with $0 lt gain. You would then apply the remaining $2,000 of lt loss against the remaining $4,000 of st gain to leave you paying tax on $2,000 of st gain. This is somewhat important because given the choice you'd prefer to offset all your st gains first, but you can't because of the like to like first rule (http://www.kiplinger.com/article/in...1-understanding-capital-gains-and-losses.html)

 

[prc117f]

I could have been confused, but I could have sworn that I chatted with someone from IB and they told me they did not report my trades to the IRS. I can't imagine the feasibility of say, TDAmeritrade reporting every trade of every customer (7 million) no matter how small the amount to the IRS. ???

Pay all your taxes. I sure do, You do not mess with the IRS. They will take you down at the worst time possible when they can go back and nail you for the max number of years which means monster penalties, potential jail etc..

Do not be greedy. Make your money, make sure the US gets to wet their beak on the action and be happy you made profits.



BTW: I thought long term losses are capped at 3K per reporting year, Short term losses have no cap.

 

[sprstpd]

BTW: I thought long term losses are capped at 3K per reporting year, Short term losses have no cap.

Total combined losses are capped at 3K.