Gains/Losses and their taxation?

So I am curious. I am new to trading. I have had some ups, and some downs. I have royally screwed up here recently and am back to square one. I have not lost any seed money (yet), but have tossed away my gains (which were around 30%). So yeah, I am pretty bummed right now...

What I am worried about is that Uncle Sam will add insult to injury. As I have taken 2 steps forward and exactly that many back, what will my tax burden be? Will I be taxed on all of my gains despite my losses or will Uncle Sam look at my account statement at the end of the year and realize I've not made an headway and not require me to pony up any loot?

spacebass5000 said:

So I am curious. I am new to trading. I have had some ups, and some downs. I have royally screwed up here recently and am back to square one. I have not lost any seed money (yet), but have tossed away my gains (which were around 30%). So yeah, I am pretty bummed right now...

What I am worried about is that Uncle Sam will add insult to injury. As I have taken 2 steps forward and exactly that many back, what will my tax burden be? Will I be taxed on all of my gains despite my losses or will Uncle Sam look at my account statement at the end of the year and realize I've not made an headway and not require me to pony up any loot?

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Could you please write this in simple English. Thanks

The US taxes you on you trading gain that you "realized", that is the net gain on the stocks that you've sold (traded) during the year, this net amount has to be reported on your schedule D. If you have paper loss ( on your current holdings) and you want to lessen the insult to your injury, just sell the loss before year-end and do not buy the same stock for 30 days, otherwise your loss will be disallowed.

If you want to net the unrealized loss to the realized gain, you can do this by asking your tax accountant to make a petition for you to follow the mark-to-market rules. The application for this tax treatment has to be done no later than April 15, 2009 for tax year 2009.

That's my best interpretation of your question.

Cheers

I thought I had explained myself well. Thanks for the help and sorry for any confusion!

Let me just put it this way. I'll use round numbers...

Let's say I initially started this year with $10,000 in my account and that I grew my account to $13,000 and then later lost the $3,000 and am now back at $10,000.

Will Uncle Sam still tax the $3,000 I made? From what you wrote, it sounds like this is not the case. Am I interpreting this correctly?

Thanks again!

From what I understand is that basically Uncle Sam will take a look at your net value at the beginning of the year and at the end of the year and if it has increased they tax you on the difference and if it moves down to your original or lower you cant get taxed as you didn't technically make anything.

Awesome, thanks!

spacebass5000 said:

I thought I had explained myself well. Thanks for the help and sorry for any confusion!

Let me just put it this way. I'll use round numbers...

Let's say I initially started this year with $10,000 in my account and that I grew my account to $13,000 and then later lost the $3,000 and am now back at $10,000.

Will Uncle Sam still tax the $3,000 I made? From what you wrote, it sounds like this is not the case. Am I interpreting this correctly?

Thanks again!

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Yes, you're taxed on the $3,000 gain, you can't deduct the losses on the shares that you haven't sold, if you want to "even it out", the only way you can do is to sell the loosers before Dec. 31, and not to buy them back within 30 days.

At the end of the year, the brokers will send you a form 1099-B to summarize the total of your stock sales for the year, those that you didn't sale will not be on that.

If you want to even them out without selling the paper loss stocks, you have to get permission with the IRS, the form to request to be allowed: Mark-to-market has to be sent with your return before April 15, 2009 for tax year 2009 (next year)

songcon said:

Yes, you're taxed on the $3,000 gain, you can't deduct the losses on the shares that you haven't sold, if you want to "even it out", the only way you can do is to sell the loosers before Dec. 31, and not to buy them back within 30 days.

At the end of the year, the brokers will send you a form 1099-B to summarize the total of your stock sales for the year, those that you didn't sale will not be on that.

If you want to even them out without selling the paper loss stocks, you have to get permission with the IRS, the form to request to be allowed: Mark-to-market has to be sent with your return before April 15, 2009 for tax year 2009 (next year)

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ah, ok... yeah, i don't hold things too long and should be evened out come tax time.

i think it's time to take a break and rethink some things. the rollercoaster was fun on the way up. not so much on the way down...

spacebass5000 said:

ah, ok... yeah, i don't hold things too long and should be evened out come tax time.

i think it's time to take a break and rethink some things. the rollercoaster was fun on the way up. not so much on the way down...

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You sell your dogs for tax purpose, other people also sell theirs. So, December is time to buy dogs to get ready for the January effect when the low priced dogs moving up nicely. So, the January effect could be your new research subject

oh man, thank you... thank you very much. i feel like someone just kicked my dogged after taking the beating i just took.

i got spooked and sold all of my positions (which were performing nicely) on Friday when the Dubai scare dropped. like an IDIOT, i then picked up some positions in a few ultrashort ETFs. yeah... VERY bad idea.

i seem to be paying a lot of "tuition" lately... i HATE this feeling but evidently it's purpose is to remind me never to overreact and think things through a little better.

and by the way, i'm now watching all of my previous positions flourish. *sigh*

spacebass5000 said:

and by the way, i'm now watching all of my previous positions flourish. *sigh*

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Would you give me credit for bringing luck to you. Yes, if it's up now, January will be a good time for you

i sure hope so