Stupid stock related question...

[glenn1]

First off, there are "short term" and "long term" capital gains, and the taxes you pay on short term gains are much higher. Right now the tax rate on long term gains is only 15%.

Consider the choices:
1. You claim the oldest purchase, $20 profit at 15% rate = $3, and your remaining shares only have $5 profit locked in at the current value which means $0.75 in future taxes. Taxes = $3.75.

2. You claim the recent purchase, $5 profit at 30% rate = $1.50, but your remaining shares have $20 in profit at the current value, which means $3 in future taxes. Taxes = $4.50.

You forgot that choosing option 1 will wash-sale rule him, but hey, he's asking for free tax advice on an internet forum so he can't be too picky about the quality of information he's getting...

 

[RobCur]

people who invest in stock basically have to much money and don't know what to do with it
I know this is true because those who aren't is either in debt or have next to nothing

 

[TuxDave]

Originally posted by: DaveSimmons
Sheesh, a lot of people here who know nothing about selling stocks. I know next to nothing since I buy and hold mutual funds instead, but maybe this will help.

First off, there are "short term" and "long term" capital gains, and the taxes you pay on short term gains are much higher. Right now the tax rate on long term gains is only 15%.

Consider the choices:
1. You claim the oldest purchase, $20 profit at 15% rate = $3, and your remaining shares only have $5 profit locked in at the current value which means $0.75 in future taxes. Taxes = $3.75.

2. You claim the recent purchase, $5 profit at 30% rate = $1.50, but your remaining shares have $20 in profit at the current value, which means $3 in future taxes. Taxes = $4.50.

None of this matters for an IRA since Roth grows tax-free and Traditional grows tax-free, and neither requires this kind of accounting.

I believe unless you come up with an alternative method, document it, and (always?) use it, the rule is first-in, first-out anyways. But I just buy mutual funds so I haven;t studied it carefully.

lol.. you're right. I forgot about that long-term gain tax vs short-term gain tax. Good point.

 

[DaveSimmons]

Originally posted by: glenn1

First off, there are "short term" and "long term" capital gains, and the taxes you pay on short term gains are much higher. Right now the tax rate on long term gains is only 15%.

Consider the choices:
1. You claim the oldest purchase, $20 profit at 15% rate = $3, and your remaining shares only have $5 profit locked in at the current value which means $0.75 in future taxes. Taxes = $3.75.

2. You claim the recent purchase, $5 profit at 30% rate = $1.50, but your remaining shares have $20 in profit at the current value, which means $3 in future taxes. Taxes = $4.50.

You forgot that choosing option 1 will wash-sale rule him, but hey, he's asking for free tax advice on an internet forum so he can't be too picky about the quality of information he's getting...

He's selling at a profit not a loss, so how would the wash sale rule apply here?

 

[Nuriko]

True, because the stocks are sold at a gain, not a loss, the wash sale rules don''t apply. As far as the OP original question, unless you specific state which group you are selling when you sold it (not after the fact), the sale is computed on a first in, first out basis.

Which means you have $2k of possible long term capital gains (if they were initially bought more than one year before the date of sale). (70-50) * 100 shares And as we all know, there is favorable tax treatment of long term capital gains (ie lower tax brackets).

As well as I'm curious, why did you want to sell the shares you bought at $65? Is it just to minimize your taxable income or something else? And before you ask, no, I'm not a CPA yet, but I'm studying for the exam now and have the equivalent of a 4yr degree in accounting.

 

[richardycc]

see my sig, anyway, read about first in first out (FIFO) or specific Identification.

 

[dinkhunter]

Originally posted by: richardycc
see my sig, anyway, read about first in first out (FIFO) or specific Identification.

you must have made a study of some sort.

 

[Farvacola]

you need to relearn math buddy

 

[fs5]

Originally posted by: Farvacola
you need to relearn math buddy

this for tax purposes, capital gains etc...

 

[CPA]

Originally posted by: nineball9
Yeah - it's capital gains. AFAIK, you can simply declare at tax time what you sold - either the 100 at $50/share or the 100 at $65/share, or some mixture of the them. You can minimize capital gains this time by declaring "bought at $65, sold at $70".
However, your capital gains in the future will be higher for the remaining "bought at $50, sold at $70" shares, unless the stock's NAV decreases.
A tax preparer or financial advisor will (hopefully) have the correct answer.

This is correct.

 

[Gothgar]

Originally posted by: amoeba
uh.....maybe you should stay off the crack before you buy stocks.

lol

 

[GeneValgene]

on my account, i can specify the following when selling shares:

Calculate using the oldest purchase first (FIFO)

Calculate using the newest purchase first (LIFO)

 

[CPA]

Some of you need to step away from the accounting books.

 

[OMG1Penguin]

Originally posted by: RobCur
people who invest in stock basically have to much money and don't know what to do with it
I know this is true because those who aren't is either in debt or have next to nothing

RobCur, you are AWESOME at life!