Tax Question

imaptone · #1 11-25-2003, 01:39 PM

This question regards year end tax implications.
Does anyone know if short term capital gains(money made on shares bought and sold this year) are offset by long term capital losses( Stocks that were bought at the end of 1998)?

adios · #2 11-25-2003, 02:11 PM

Why not? How else would you account for a realized loss? Haven't looked at the tax code myself though.

deathtoau · #3 12-01-2003, 06:15 PM

No they are not. Short term gains are only offset by short term losses and likewise for long term gains/losses. Because the tax rate on short term results is different than the rate on long term results, the two do not offset.

Cazz · #4 12-03-2003, 05:24 AM

If you have excess short term losses, I believe a small amount ($3,000 ?) can be applied against long term gains. Anything left over is carried forward to the next year.

squiffy · #5 12-03-2003, 02:52 PM

You can double check at www.irs.gov just do a search on the IRS official website for capital gains and you will find the form and general instructions.

Ashe · #6 12-04-2003, 12:14 PM

Accountant here.

Long-term losses can be used to offset short-term and long-term gains. Short-term losses can be used only to offset short-term gains and excess losses can be deducted up to $3,000 per year. [img]/images/graemlins/smirk.gif[/img]

Yes, you can offset these gains/losses. Make sure to do it before year-end.

RocketManJames · #7 12-04-2003, 09:08 PM

Since you're an accountant, I'll ask. How does one know if he qualifies as a trader... so that he can ignore all the wash-sale rules?

I currently do NOT trade for a living, but in a 'fun' portfolio of mine, i trade quite a bit. The 'fun' portfolio is sizeable, and I am currently denoted as a PDT in the account.

Any help in this area? This is my first year taking a stab at trading for short-term income.

-RMJ

Ashe · #8 12-08-2003, 04:03 PM

Not sure, but I believe that traders cannot avoid the wash sales rules because the only exemptions are for "dealers in securities".

"Taxpayers who buy and sell or hold securities for investment or speculation, irrespective of whether such buying or selling constitutes the carrying on of a trade or business, are not dealers in securities ."- Tax case from the 50s

I really can't spent too much time on this without billing you. [img]/images/graemlins/smirk.gif[/img] Do you know any traders that are able to avoid these rules? If so, I'll dig a little deeper.

RocketManJames · #9 12-09-2003, 09:39 PM

Thanks for the response Ashe. I did some more digging myself. And, I guess there's something called "Mark-to-Market" in order to qualify as a trader for tax purposes. If MTM is elected, then there are no wash-sale rules, but it does not suit me. Since, at the end of the year, your held positions are "marked to market" meaning that they will be treated as if you sold them that day w/o really selling them. This is very bad for me, since I a large percentage of my holdings are long-term. I only swing trade actively with a much smaller percentage.

Thanks. You may want to look into MTM election (in case your clients require this).

-RMJ

Ashe · #10 12-09-2003, 10:08 PM

Hey RMJ,
Thanks for the info [img]/images/graemlins/smile.gif[/img] I've heard this term before around the futures market, but lucky for me none of my clients day trade. I'm sure it would make for a real ugly schedule D.

So thanks again. All knowledge is good knowledge, and maybe I'll be able to use this in the future. Hopefully with a fat bill. [img]/images/graemlins/smirk.gif[/img]

Ashe