mpell has three interesting questions:"How does one find a good accountant! Word of mouth or is there some sort of credential one should look for to assure the person has really good training?"Word of mouth has always worked for me. I can't believe that any tax accountant doesn't understand fairly basic investment accounting. If yours doesn't he flunks. My law firm had a reasonable recommendation... and they knew someone who understood my sort of business.If you are becoming a day-trader, and want to consider trying to make your trading into a business, you probably need a specialist. I'm not sure how you'll find one, although http://www.fairmark.com/ has some discussion under the heading "Traders and Investors.""I've made some $ this year, and lots of trades (my first year trading and I wanted to let myself experiment a bit so traded more than I will probably in the years to come...) I'm really busy, not familiar with Quicken, etc., and I've made enough profit that I'm wondering about hiring someone to tally up my trades, dividends, etc. Would I ask an accountant to do that or would I try to find someone with bookkeeping background who wants a few hours of extra work?"Are you sure you made money? How many trades was it? So you went crazy, did you? You did save the broker's confirmation sheets, right?Seriously, it shouldn't be hard for nayone who knows how to prepare Form 1040 Schedule D to add up your trades. And since every trade will need to be reported, whether this year or possibly (if you're holding shares over the end of the year) in a future year, you'll need the info, and you'll need to keep it for future years if you're keeping any shares for the longer term.You must preserve these records... it's not your brokerage's job to remember, seven years from now, what you paid for a share of stock which you're finally selling it. True, they'll try to help, if they can... but it's your taxes, and your problem."If I buy 100 shares of stock for, say, $1/a share and it doubles, I have... $200 worth. If I sell 50 shares, that means I've taken out only my original investment and what's left is my $100 profit, correct? How does the IRS look at this? Do I have to report the sale? Do they consider the $100 from the 50 shares sold as profit or my initial investment capital??"Nope. You may think of it that way (I do, too), but Uncle Sammy, as Roy usually refers to it, doesn't.When you sell those fifty shares, you are selling stock which cost you (has a cost basis of) $50 for $100, and therefore making a capital gain of $50... this ignores commissions, which should be added in to the cost, and subtracted from the sale, but this is the general idea. So you report a $50 gain on your Schedule D this year, and continue to remember that the other fifty shares that you still have also has a cost basis of $50, for the time when you sell them. When you finally sell those, you report the gain from that sale based on the original cost of the shares. You pretty much have to report every sale, and account for every share, whether you're making or losing money.If you bought and sold the same stock several times, there are some additional rules which can apply. Normally, if you bought at multiple times, you sell "FIFO" (first in - first out), unless you take particular action to indicate which shares you are selling. And if you sell for a loss, and buy back within a short time, that's a "Wash Sale" and also gets special treatment.Alternatively, there are totally different rules if you have the business of being a trader, and use "mark to market" accounting. As I suggested up above, you'll need expert advice for that.Happy counting... and may you continue to make "$"!Dick Smith
Best Of |
Favorites & Replies |
Start a New Board |
My Fool |
BATS data provided in real-time. NYSE, NASDAQ and NYSEMKT data delayed 15 minutes.
Real-Time prices provided by BATS. M