Tax Question???

[FJR1300Jeff]

I just filed my taxes with Turbo tax a few days ago. Then I get a 1099 form, from Scottrade.

I sold $2500 worth of stock in 2005, but I turned right a round and bought $2500 worth of another stock.

Is that a taxable event? Some of the $2500 was a gain. But I figured since I reinvested I was in the clear.

Also since I already filed I'm wondering if its even worth doing a corrected return.

Any advice???

 

[KSFJR]

I am a CPA and you should file an amended return. If not the IRS is going to send you a letter asking about the income and they will tax you on the $2,500 without factoring in the purchase price.

The sell of the stock is an event unto itself. The stock that you purchased last year is irrelevant for this purpose. The 1099 was for the proceeds from the sale of old stock. You will have to offset it by its purchase price on sched. D. You will need acquisition date and cost and the date of sale and amount, which the 1099 will reflect and the period of holding will determine whether it is a long term or short term capital gain or loss.l

 

[motorgod]

Don't do anything....and I'll buy your bike at a discounted price at the tax lien sale

 

[FJR1300Jeff]

Don't do anything....and I'll buy your bike at a discounted price at the tax lien sale

Nice try......already filed that amended return...only cost me another $200.

I guess the gov't needs the money more than I do. :erm:

 

[jaybird]

KSFJR is absolutely correct. Another thing to be aware of: if you sell stock for a loss, you aren't supposed to buy the same stock back for a 30 day period. Doing so violates the "Wash Sale Rule" and the IRS will disallow the loss.

And if you decide not to file the amended return, you can always pull the ole Steve Martin routine he had when asked why he hadn't filed a tax return for the past several years -- his reply was simply "I FORGOT".... Jay

 

[MrT]

After filing my own taxes again this year, I realized more than ever that tax accountants have job security for life! Does it really have to be that complicated? :dribble:

 

[FJRski]

So what we need to do is lock all of our elected officials in the capital with a pencil, calculator, schedule D, and a shoebox full of their receipts, and tell them no exit and no pizza delivery until they have completed filling out their own 1040. I guarantee they will emerge with meaningful tax reform legislation.

 

[JimLor]

KSFJR - if I may, let me ask you a question I know I don't really want to hear an answer to...

Bought 1k of a mutual fund in 1980 - other than reinvesting dividends I never contributed more $$. Took out 1k for a car a bunch of years ago (probably 15 or so) and liquidated the fund last May - ~6k - to help pay for Maxine (a lovely Galaxy Blue 2005 Yamaha FJR).

Records, nah, I don't have no stinkin' records (except tax returns back to around 1977 w/all associated documents). My question is - my basis is 1k - can I also deduct the taxes I paid on gains each year, or am I basically gonna get the ole' bananna in the butt? I'm assuming that the math is easy, 6k - 1k = 5k I gotta pay taxes on.?? In other words am I gonna have to pay taxes on the gain that I already paid taxes on?

Thanks.

 

[MCRIDER007]

In other words am I gonna have to pay taxes on the gain that I already paid taxes on?

In case KSFJR is not available, I think I can answer your question. I assume you are talking about paying taxes on the mutual fund's capital gains distributions or dividends that were reinvested in the mutual fund. Those reinvested capital gains distributions and dividends also increase the mutual funds "basis" so you do not have to pay taxes twice on those amounts. Many brokerage firms keep track of the "basis" for you, otherwise you are going to have to dig through your old tax records and figure out what the current "basis" really is.

 

[jaybird]

Jimlor -- MCRIDER007 is correct. Assuming you had all the records, your "cost basis" is the original $1,000, plus all of your reinvested dividends and capital gains over the year. For example, assume $1,000 beginning investment, and assume over the years the total divs and cap gains reinvested was another $3,000. You sell for $6,000, and you Long Term Capital Gain would be only $2,000 -- which, is now taxed at a maximum rate of 15%, or an additional tax bill of $300.

Don't feel like the Lone Ranger -- most folks have no clue what their real cost basis is on long dated investments like this. The IRS gets the report of the net proceeds -- and you then need to advise them of the date of purchase and your "cost basis". They have no idea what you paid for it. And chances are that it will never come up unless you are involved in an audit . Show some reasonable effort to "reconstruct" the basis, and you should be fine. I figure a $6,000 mutual fund won't raise a flag that will cause an audit.

Our tax system is really screwed up..... good luck. Jay

 

[MrT]

Liquidated the fund last May - ~6k - to help pay for Maxine (a lovely Galaxy Blue 2005 Yamaha FJR)

This sure sounds like a legitimate "roll over" to me!

 

[JimLor]

jaybird - MCRIDER007 - THanks for posting. I had hoped what you both said was the answer, but knowing that common sense and fair play have no part in the tax code, I thought I was hosed!! Would you both mind signing my tax return...

Thanks again - Jim

Oh yeah, since I made the investment so long ago, the company (Fidelity) didn't have the records past 1992 - lucky for me I never throw anything out!

 

[KSFJR]

JimLor - sorry to just be getting back to you but the days are kind of long right now.

If I'm reading you correctly, in that you have invested $0 more and that all that is there is your initial investment plus growth, you will have no taxes as every year they sent you a 1099 for dividends and/or interest resulting in your paying taxes on the growth every year. Now you can take it out with no taxes. They will most probably send you a 1099B on closing out your stock but the basis and sales price are the same as you have already paid your taxes on the gain. For acquisition date just use various and the sales date will be on your form from the Mutual Fund.

 

[ostee874]

KSFJR - I think you are assuming that he is selling the stock purchased (by reinvested dividends) for the same dollar per share price as he origially reported as dividend income each year. If this is like most mutual funds that have been held onto for 15 years, the per share price is now considerably higher than the original reinvested dividends price that the tax was originally paid on.

Call the company that issued the mutual fund and get a print out of the yearly dividend declared per share, factor in the shares originally purchased and the reinvested shares purchased and you will come as close as possible.

 

[JimLor]

I did call the company and they sent me records back to 92'. They didn't go to the computer record keeping until after - I can and will go back to each of my returns "package" and pull the tax docs for this fund. I just love doing taxes!

 

[MrT]

Just think of it as a healthy mental exercise that will keep your brain fresh into old age!

 

[panthercity]

I just posted on www.cpa.com to see if they new the cause and cure for "ticking"...