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Author: DGX5 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Question Date: 12/4/1998 1:19 PM
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First post so please be gentle. I have read through a good amount of this board hoping to find someone with the same question. I couldn't find it so here goes...
I have money in a mutual that has been there since July 98 and am ready to move it to a discount broker so I can start being Foolish. The mutual has lost money since it was put in bringing me, finally, to my question. Is this considered a regular loss or will I incur something for moving assets around in such a short period of time? Come to think of it, it was moved from another mutual that was lossing. Do those losses add up for the tax year? Can you tell I'm a rookie at this...?
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Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 6766 of 121061
Subject: Re: Question Date: 12/4/1998 8:19 PM
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[[First post so please be gentle.]]

Contrary to popular belief, I try to be gentle with everybody...first post or not.

[[ I have read through a good amount of this board hoping to find
someone with the same question. I couldn't find it so here goes...]]

Don't forget to check out the Taxes FAQ area. There is a LOT of good tax information there on various tax issues. So you may find answers to many of your future questions there. Bookmark that site and visit it often.

[[ I have money in a mutual that has been there since July 98 and am ready to move it to a discount
broker so I can start being Foolish. ]]

Congrats!!! Welcome to the party.

[[The mutual has lost money since it was put in bringing me,
finally, to my question. Is this considered a regular loss or will I incur something for moving assets
around in such a short period of time? Come to think of it, it was moved from another mutual that
was lossing. Do those losses add up for the tax year? Can you tell I'm a rookie at this...?]]

Before we get to your question, might I suggest some reading for you? The Motley Fool Investment Tax Guide was developed specifically for people like yourself: new to investing and taxes. It will give you answers to many of your basic quesions...such as the one noted above. It will also give you more sophisticated tax strategies, and will allow you to deal with many investment tax issues head on. It's something that you might want to consider buying for yourself as an early Holiday Season present. Give it some thought.

Now...on to your question.

Sales of mutual funds are considered capital gains or losses. If your "basis" (or cost for tax purposes) in the fund is LESS than your net selling price, you'll have a capital loss. Obviously, if you sell it for more, you'll have a capital gain.

Since you have indicated that you are selling your funds at a loss (make sure you KNOW how to compute your basis in the funds...we discuss this in The Tax Guide, but if you would like, you can review IRS Publication 550 for information on how to arrive at your basis on the mutual fund), you'll likely realize a capital loss. If you have held the funds for a year or less, those losses will be short term. If you have held them for more than a year, the losses will be long term.

You'll have to net these losses with all of your other long term and short term gains and losses (I described this netting process in detail about 5 posts back...check it out).

If you find that, after all of the "netting" you have a net capital loss, you'll be able to use up to $3,000 to offset your other income (such as wages, interest, dividends, etc.). If your losses are greater than the $3k allowed to be deducted currently, you will carry those losses over to 1999, as a capital loss carryover, and the netting process will begin all over again.

I hope that this helps. And I would really suggest that you check out the Tax Guide.

TMF Taxes
Roy

Want 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. There is still time available to do that tax planning (and tax saving) before the end of the year. 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. Pay special attention to the "archives" section. 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.


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