Short term tax - I may have misunderstood

[mokuzz]

What is the name of your state (only U.S. law)? Virginia

Hello, I am very new to this and tax is very confusing for most people. But I'd like to get some help from some of the experts here. I just started trading and this is my delema.

I originally invested $7,500. I've had my gains and losses. I originally purhsed 2 stocks couple months back.

Stock A: purchased 17,200 for $5676 in March
Stock B: purchased 500 for $2500 also in March

1 week ago, I sold 5000 stock A for $6000. Then purchased Stock B for that same amount. But both took a dip down and in the end I sold Stock B and was able to purchase the original 5000 Stock A back for a loss of $30.

What I'm afraid of is, the fact that I had sold for $6000, I will be taxed on that amount? Even though I really did not make any profit, but a loss of $30? Now my e-broker shows I have around $8900 "realized gain" from that sale and a couple more from a previous sale . Am I responsible for tax on that $6000 from the first sale?

I'm just worried because if I decide to daytrade Stock A again in the near future, instead of being taxed on that gain of the day, I may be taxed in that entire amount of the original sale of the day?

I am very confused. Please advice.

[tranquility]

Don't think of your trades as one thing, think of it as a series of many small discrete things. I suggest a book on the tax aspects of trading if you are going to do it much as how you are taxed affects the trading strategy of anyone smart enough to make money.

Stock A has a basis of $.33 a share.
Stock B has a basis of $5 a share.
Transaction costs are added to the basis.

First sale of stock A had an amount realized of $6000 with a basis of (.33 x 5000) $1650 for a gain of $4350.

The shares of stock B you purchased with that $6000 have that as the basis. I don't know the basis per share as you did not say how many shares you bought.

Quickly selling and buying without enough time is called Wash Sales and basis tends to carry over. But, the rules are more then can be listed here.

If you do a lot of buys and sells, you can become a trader and the method of calculating gains and losses, especially at the end of the year, are different. Again, this would need a lot more explanation including which basis is used for which stock is sold. (For instance you buy some at $10 and some at $20 a share and sell for $15 a share, did you have a gain or a loss?)

A good place to start is Publication 17 from the IRS website.
[url=http://www.irs.gov]Internal Revenue Service[/url]

[Flyingifr]

Ignore the above post.

Since the sale of stock A and repurchase of A took place within 30 days it is a "wash sale" and you do not realize gain or loss - you simply adjust your basis in A.

[tranquility]

Describe the facts indicating a wash sale. While a possibility based on his imprecision:

Quickly selling and buying without enough time is called Wash Sales and basis tends to carry over. But, the rules are more then can be listed here.

I don't see the facts for your statement. By using "within 30 days" when the OP didn't say anything about 30 days, everyone who reads will believe 30 days is the wash sale rule. Is it?

By-the-by, "simply adjust your basis" is not useful to the OP. Give an example. The OP used numbers, you can too.

[davew128]

Originally Posted by Flyingifr

Ignore the above post.

Since the sale of stock A and repurchase of A took place within 30 days it is a "wash sale" and you do not realize gain or loss - you simply adjust your basis in A.

Exactly where is the wash sale here? The first stock was sold for a GAIN and the second stock hasn't been repurchased.