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Author: TMFExRO Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121219  
Subject: Re: Capital Gains Tax Rates-Roy Lewis Date: 1/9/2001 1:25 PM
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Roy Lewis describes the 'phantom' sale/purchase for Jan 1, 2001, specly. the section "Getting the Super-Low Rates on Capital Assets Purchased Before 2001".
Are there restrictions as to when you sell the stock in order use the adjusted cost basis? If there is no restriction, it seems the new "date of purcahse" and CostBasis are as of 1/1/2001.


Your premise is correct, except I'm not sure off the top of my head whether it's 1/1/2001 or 1/2/2001. The valuation for the deemed sale is the closing price 1/2/2001.

An example: if we bought 1000 XYZ at a CostBasis of $5,000 on 1/1/1994 and take (i.e., record) the super-long-term action as described dated 1/1/2001 (value on that date is $50 per share). If the stock is sold on 2/1/2001 for $51 per share, the capital gains is based on a short-term gain of $1 per share. If sold on 1/1/2002, it is long-term gain with the same cost basis of $50 per share.


The deemed sale resets the holding period and basis, so your assumptions are correct if the long-term date is corrected. (It's a year and a day.)

I looked to find something in the 2 publications (550 and 540) referenced and could not. Does someone have info on where to look?

Try the instructions for Form 4797, which is where the deemed sale will be reported.

Also, when was this tax revision passed?

PL 105-34, 1997.

TMF ExRO
Phil Marti
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