Taxes and Selling Stock

[dogert]

What is the name of your state? Nevada

Last year I sold some of one of my stocks and used that money to buy into another stock. That stock I invested into went down so I lost about half the money I invested so I sold the stock and invested it back into the stock I had originally sold in the first place. What would I have to show as income on my taxes? Could I write off the loss?

[FlyingRon]

You'll need to give us the dates of the purchases and sales.

[anteater]

And whether the first transaction resulted in a gain or loss.

[LdiJ]

Originally Posted by dogert

What is the name of your state? Nevada

Last year I sold some of one of my stocks and used that money to buy into another stock. That stock I invested into went down so I lost about half the money I invested so I sold the stock and invested it back into the stock I had originally sold in the first place. What would I have to show as income on my taxes? Could I write off the loss?

You would have two stock sales to report on schedule D. The first stock sale which resulted in either a gain or loss (you didn't say) and the second transaction which resulted in a loss. The two sales would offset each other for either a gain or a loss. If the overall loss is more than 3000.00, then you are limited to 3000.00 of loss, per year, until the total loss is fully used up. That is of course assuming that both sales were made in the same tax year.

Now...that is a SIMPLISTIC explanation. In reality, you should seek the assistance of a tax professional to handle the return for you.

[tranquility]

You need to let us know the times involved. If, within a period of 30 days before or 30 days after a sale a person buys, contracts to buy or options to buy substantially similar stock it is called a wash sale. Different rules apply then. Otherwise, each sale is a seperate item on your Schedule D. You calculate the gain or loss on each sale and pay taxes on the aggregate gain or take the aggregate loss up to $3,000 a year until it is used up.

[dogert]

Ok, here is some more information.

I did make a profit from selling my first stock. I sold part of that stock on 4/19/2006 and I bought the other stock on 5/11/2006 and as that stock went down i sold out on 7/24/2006 and put the money back into the original stock. I did lose more than I gained so I should be able to write off the difference right?

The dollar amount here aren't huge so I will probably just pay what the irs wants and be done with it, but I am just wondering for the future.

[LdiJ]

Originally Posted by dogert

Ok, here is some more information.

I did make a profit from selling my first stock. I sold part of that stock on 4/19/2006 and I bought the other stock on 5/11/2006 and as that stock went down i sold out on 7/24/2006 and put the money back into the original stock. I did lose more than I gained so I should be able to write off the difference right?

The dollar amount here aren't huge so I will probably just pay what the irs wants and be done with it, but I am just wondering for the future.

You don't have to pay the tax if you don't owe it. Did you get a CP-2000 letter? What you can do is prepare a Schedule D showing your real capital gain/loss on the sales and send it, along with a copy of the CP-2000 letter, and a letter of explanation, to the address on your CP-2000 letter.

You may also want to file an amended return, since you may be entitled to an additional refund if you had overall losses. The amended return can also be included with the CP-2000 response.

Or, in the alternative, get a tax professional to handle the whole thing for you. They can do it easily, and probably won't change an arm and a leg to do it either.

[dogert]

Thanks for everyones replies. You have been a lot of help.