Taxes on stock trading gains


P

Paul

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?
 
P

Paul Thomas, CPA

Paul said:
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


Which transaction creates a capital loss of $1000.



and bought back exactly 100 shares the same day

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.


at $80/share. how is this gain
of 100x(90-80)= $1000 taxed?


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).







It does not appear to be a capital gain,
is it then ordinary income?


<<Shaking my head>>
<<No wonder the stock market tanked>>
 
P

Paul

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 :)
 

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