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Author: deepdude Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Capital gains Date: 4/10/1998 3:45 PM
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I am a novice investor with some capital gains in yr. '97. I wanted to know how this gain is calculated. I think it would be easier if I pose my question with an example. Assume all transactions took place in the same year.

- Bought 50 shares @ $1.00 per share in April

- Bought 100 shares @ 1.50 per share in June

- Sold 25 shares @ 2.00 per share in August

What is my capital gain ? Basically the question is that when a sell some shares in a year - how is it determined what price I bought them at - hence what is the actual gain ?

I am only trying to understand how the actual gain is calculated i.e. how much money do I pay capital gains tax on ? Tax rates and the changes are irrelevant to my question so please ignore the timeline and the change in tax rates. Thanks !
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Author: synchronicity Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 3394 of 121061
Subject: Re: Capital gains Date: 4/10/1998 4:28 PM
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<<- Bought 50 shares @ $1.00 per share in April

- Bought 100 shares @ 1.50 per share in June

- Sold 25 shares @ 2.00 per share in August

What is my capital gain ? Basically the question is that when a sell some shares in a year - how is it
determined what price I bought them at - hence what is the actual gain ?>>

All sales are considered to be FIFO (unless you 'specifically identify' the lot to be sold), so for tax purposes you are considered to have sold 25 of your April shares.

If you're new to the Board, check out the Tax FAQ (one of the options from the Home page). It has answers to a ton of tax questions. And hopefully your investments can pan out as good as your example!

-synchronicity

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