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I know about the capital gains tax, i.e. 20% if held more than a year (basically), BUT what are the state tax consequences? Is it an additional 10%?
Thank you from the bottom of my greedy little heart!
ryan
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ryan633: "I know about the capital gains tax, i.e. 20% if held more than a year (basically), BUT what are the state tax consequences? Is it an additional 10%?
Thank you from the bottom of my greedy little heart!"


It depends on your state (and each is different). In Texas, it would be 0.0%.

JAFO

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I know about the capital gains tax, i.e. 20% if held more than a year (basically), BUT what are the state tax consequences? Is it an additional 10%?
Thank you from the bottom of my greedy little heart!


That'll depend entirely on your state laws. Here in CA, capital gains get no special tax break - they're taxed just like ordinary income.

--Peter
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Thanks JAFO. The state is CA.
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Ptheland,
Thanks for info on CA (where I'm from)--so you mean that on top of the 20% tax federally, you pay ordinary income tax on the gain to the state? Wowy!

ryan633
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Thanks for info on CA (where I'm from)--so you mean that on top of the 20% tax federally, you pay ordinary income tax on the gain to the state? Wowy!

It may not be as bad as it sounds. CA rates go up to 11% for really high incomes, with most people more like 4% or 6%.

If the taxes on it are bothering you too much, I'll give you the same offer I've given many others. Give me the gain and I'll sign a note to you. I'll default on the note, giving you a loss to offset your gain and eliminating the tax on the gain. ;-)

--Peter <==still waiting for the first taker on this standing offer.
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ptheland writes (in part):

If the taxes on it are bothering you too much, I'll give you the same offer I've given many others. Give me the gain and I'll sign a note to you. I'll default on the note, giving you a loss to offset your gain and eliminating the tax on the gain.

I reply:

I'll take it! Then I'll sue you to collect the note, and receive prejudgment interest at the rate on the note, and post judgment interest on the judgment (including prejudgment interest) at 10% per annum. Still interested? (Who says lawyers have no sense of humor? Whoever it is, I'll sue 'em for defamation!) --Bob
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I wrote (in part):
If the taxes on it are bothering you too much, I'll give you the same offer I've given many others. Give me the gain and I'll sign a note to you. I'll default on the note, giving you a loss to offset your gain and eliminating the tax on the gain.

Bob replied:
I'll take it! Then I'll sue you to collect the note, and receive prejudgment interest at the rate on the note, and post judgment interest on the judgment (including prejudgment interest) at 10% per annum. Still interested? (Who says lawyers have no sense of humor? Whoever it is, I'll sue 'em for defamation!)

I respond (with tongue firmly planted in cheek):

Just like a lawyer to forget the basic issue when he smells a lawsuit. <grin> If you sued me and got a judgement, you wouldn't have a bad debt now, would you? So you'd still have the taxes to pay on your capital gain and the original problem would not be solved. <shaking head in dismay and mumbling to self> Will they ever learn?? ;-)

--Peter
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ptheland writes (with keyboard firmly planted in cheek):

Just like a lawyer to forget the basic issue when he smells a lawsuit. <grin> If you sued me and got a judgement, you wouldn't have a bad debt now, would you? So you'd still have the taxes to pay on your capital gain and the original problem would not be solved. <shaking head in dismay and mumbling to self> Will they ever learn?? ;-)

I reply:

Gadzooks, you're right! But if I don't take my best shot, how will I ever convince the IRS that the debt really is bad? This is becoming too much trouble; I think I'll keep my money after all.

And there's a bright side. I can't think of a way to characterize the prejudgment or postjudgment interest as anything but ordinary income, so by avoiding a route that earns the interest, I'm saving even more in taxes! --Bob
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Bob's lightbulb clicked on:
Gadzooks, you're right! But if I don't take my best shot, how will I ever convince the IRS that the debt really is bad? This is becoming too much trouble; I think I'll keep my money after all.

<slapping a mortar board, robe, and diploma on Bob ala the Genie in Aladdin>

HE CAN BE TAUGHT!!! Maybe there's hope for the profession yet. ;-)

--Peter <==having a slow day on his last day in a temp position before tax season - can you tell?
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Peter, obviously Bob is hoping the pre-judgment interest on the loan and post-judgment interest on both the loan and the pre-judgment interest will pay his taxes for him and it only costs him filing fees in cash to sue you. ;^)
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