When I buy stocks at two different prices, are the purchases weighed? Meaning, if I buy 10 shares of XYZ at $5 and another 90 shares at $6, is my average cost $5.50 or do I have to adjust it since the two purchases were of different amounts of shares? Is $3000 the most one can deduct as capital gain losses? If you have more than that, it rolls over right?Shelton
>When I buy stocks at two different prices, are the purchases weighed?It makes no sense to do otherwise. However, if you sell a specific lot of shares, you can use the actual cost as your basis for tax purposes. In your example, if you sold all 100 shares, your basis is (10*$5+90*$6), or $590, with an average (weighted) cost per share of $5.90. However, if you sold only the 90 shares you bought at $6, your basis is $540.>Is $3000 the most one can deduct as capital gain losses? If you have more than that, it rolls over right?You can deduct as much as you have to offset capital gains; however, only $3000 can be used as a deduction against ordinary income. Thus if you have capital gains of $10000, and losses of $15000, you would net zero capital gains, deduct $3000 from income, and still have $2000 left to carry over to the following year, where the process repeats.
[[When I buy stocks at two different prices, are the purchases weighed?]]Nope...when you are dealing with stock purchases, you must use either the FIFO method (First In-First Out) OR the specific share identification method. Those are your ONLY two options. There is no "averaging" when dealing with stocks. The rules for mutual funds are quite different, and you have more options. You can read more about specifying shares in the Taxes FAQ area. You might want to check it out. We also discuss this issue in much greater detail in the TMF Investment Tax Guide. [[ Is $3000 the most one can deduct as capital gain losses? If you have more than that, it rolls over right?]]$3k (net) is all you can use to offset other income in any one year. If your loss in greater than the $3k allowed, the additional loss is carried forward to be used in future years.This is also discussed in greater detail in TMF Investment Tax Guide. Also, you might want to check out IRS Publication 550 for more discussion on both the stock and capital loss issues.TMF TaxesRoyWant to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Be the first one on your block to own this masterpiece. It'll help you with your 1998 taxes, and it's never to early to start planning for your 1999 taxes. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
[[ >When I buy stocks at two different prices, are the purchases weighed? It makes no sense to do otherwise.]]But, the problem is, you can't USE an averaging method when dealing with individual stocks. You get to use either FIFO OR he specific shares method. There is no provision for "averaging" your stock shares. It's not provided for in the tax code.TMF TaxesRoy
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |