Taxes on stock trading gains

Discussion in 'US Taxes' started by Paul, Nov 11, 2008.

  1. Paul

    Paul Guest

    I have a question about taxation of stock trading gains. Let's say I
    have 100 shares with a basis of $100/share (purchased two years ago).
    I sold these 100 shares at $90/share and bought back exactly 100
    shares the same day at $80/share. how is this gain of 100x(90-80)=
    $1000 taxed? It does not appear to be a capital gain, is it then
    ordinary income?
    Paul, Nov 11, 2008
    1. Advertisements

  2. Which transaction creates a capital loss of $1000.

    Which transaction creates a "wash-sale" and the prior loss is suspended.
    The $10 per share "loss" is tacked on to the purchase price of the
    replacement shares.

    What "gain"?

    It's a loss on a wash sale transaction. Your paper basis is $80 + the $10
    "wash sale" loss - per share - till you sell it ~~and stay out of it~~ for
    at least 30 days. So if tomorrow you need to fill up your gas tank and sell
    it all at $70 per share, the basis is $90 per share ($80 purchase price +
    $10 suspended losses).

    <<Shaking my head>>
    <<No wonder the stock market tanked>>
    Paul Thomas, CPA, Nov 11, 2008
    1. Advertisements

  3. Paul

    Paul Guest

    Thanks Paul. This is where I was confused -- if I did not do any
    trading I would have 100 shares at the end of the day (with the old
    basis of $100/share), but since I traded I ended up with the 100
    shares PLUS $1000 in cash and I thought since I received real cash it
    should be taxable in some form. I realize that my basis went down
    though and when I eventually sell the shares, I will have to pay a
    higher tax as a result of these trades.

    Thank you for your answer. And I swear I did not have anything to do
    with the stock market crash :)
    Paul, Nov 11, 2008
    1. Advertisements

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments (here). After that, you can post your question and our members will help you out.