If you sell your stocks that have gains, you'll incur capital gains tax even if you reinvest the proceeds in similar stocks or even the same stock. You CAN however defer the capital gains tax by investing some or all of the gains in a Small Business Investment Company (SBIC) within 60 days. The result is that you owe no tax until you dispose of your interest in the SBIC. There are ~200 SBICs nationwide with most states sponsoring some that often specialize in local business ventures. There are also a few that trade publicly so smaller amounts can be invested (Allied Capital - ALLC on Nasdaq and Waterside Capital - WSCC also on Nasdaq). Investing in SBICs can obviously be risky since you're investing in small companies but the rewards can also be great (AOL, Intel, Apple and Fed Ex all got strarted through an SBIC). All SBICs offer tax deferral of up to $50K of your capital gains annually and can even help you stretch a short-term capital gain into a longterm one. If you are interested, you can call your local SBA office or visit the SBA website (www.sba.gov). Make sure that you are comfortable with an SBIC's investment history and philosophy before investing ... remember you have 60 days from the time you sell your capital gain stock to invest in an SBIC and still qualify for the tax deferral.
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