The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Netting capital gains and losses Date:  12/30/1999  4:39 PM
Author:  ptheland Number:  24110 of 123153

Netting out your capital gains and losses
Fishing around in schedule D

Most of us are aware that you have to net out your capital gains and losses when figuring up your taxes for the year. But how does all this netting work? Should I be hanging around the local dock to learn how to net my capital gains and losses? Let's try to unravel some of this mystery.

First of all, there are a couple of levels of netting that go on. Long-term items are netted separately from short-term items. Then the long and short are netted together to produce the final result. It's easiest to just look at an example. Long John Silver sold two stocks so far this year. Both were held for more than a year, so are long-term items. He had a gain of $1,000 on his investment in (an internet startup selling trout and salmon online to unlucky fisherman), but a $600 loss on Fish Are Us (a retailer of fish-shaped toys for kids). Subtract the loss from the gain and we find that he has a net $400 long-term gain. Now let's say that Long John sells two more stocks before year-end. His investment in Mackerel Industries has turned out to be a real stinker. So he unloads it for a $300 short-term loss. And Minnow, Inc. turned a small short-term gain of $50. Net these two items together and Long John has a $250 short-term loss. Finally we net the short-term items with the long-term items and find that Long John has a net $150 long-term gain.

If you roll this around