The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Is this legal?||Date: 9/2/2001 12:39 PM|
|Author: edcosoft||Number: 53759 of 124936|
I was thinking of employing the following strategy.
I buy, say $5000 of ATTT. It goes up 20% in the first year, to $6000. I sell $5000 worth
of it and report a cost-basis of 5000 -- no cap gain. We'll assume it stays up. I hold the
remaining until the 18-month minimum has elapses. I sell this for $1000 or so, and report a
cost basis of zero, so I pay the long-term rate on the $1000 profit.
Is this comprehensible? Legal? Brilliant?
None of the above. You sold 5/6 of your $5,000 basis stock for a profit of 5/6 X $1,000 = $833. You then hold 1/6 with a basis of $833. You buy and sell # of shares, not $ value. See IRS publications and schedule D. ed
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