Hi,

If I have bought 2 stocks A and B at prices 100$ each.

Say I sell A in one month's time (same FY) at 90$ -- loss = 10$.

Then I sell B after a couple of years at 110$.

Can I offset the loss realised from my earlier transaction ?

"If I have bought 2 stocks A and B at prices 100$ each.

Say I sell A in one month's time (same FY) at 90$ -- loss = 10$.

Then I sell B after a couple of years at 110$.

Can I offset the loss realised from my earlier transaction ? "

It doesn't work quite like that, but close.
We will assume you have no other stock transactions.
In April 2002 you have to file taxes. You lost $10 a share on stock A.
You can take up to $3000 in loss against your ordinary income. So
you take the loss on A, and pay less taxes. You still own B. No taxes
due. If you had more than $3000 in that $10 a share loss, the next
year you can take another $3000 against ordinary income.

A couple years later you have a profit on B. Then you pay taxes
on it. If there is anything left of the original loss, then you can
take it against the profit on B.

Best wishes, Chris

======

It doesn't work quite like that, but close.
We will assume you have no other stock transactions.
In April 2002 you have to file taxes. You lost $10 a share on stock A.
You can take up to $3000 in loss against your ordinary income. So
you take the loss on A, and pay less taxes. You still own B. No taxes
due. If you had more than $3000 in that $10 a share loss, the next
year you can take another $3000 against ordinary income

=======

Thanks for the reply!.

One more qs. Does ordinary income include salary paid by employer. Then since this comes with tax deducted at source, will I need to apply for a rebate while filing taxes ? Or tell my employer about the loss so he does the necessary tax adjustments ? Or carry it over to the next FY ?

Thanks

If I have bought 2 stocks A and B at prices 100$ each.
Say I sell A in one month's time (same FY) at 90$ -- loss = 10$.
Then I sell B after a couple of years at 110$.
Can I offset the loss realised from my earlier transaction ? "

If you sold A within 30 days of buying B you have a Wash Sale and the loss is not allowed but rather it is added to the basis of B. You effectively offset the loss when you sell B. ed

edcosoft said.....

If you sold A within 30 days of buying B you have a Wash Sale and the loss is not allowed but rather it is added to the basis of B. You effectively offset the loss when you sell B. ed


huh? The writer bought 2 different stocks, A and B. Wash sales have nothing to do with it.

Rip

huh? The writer bought 2 different stocks, A and B. Wash sales have
nothing to do with it.

Rip

Sorry, Rip, as usual I misread the question assuming noone would ask that unless it was the same company? Oh, well. ed

"Does ordinary income include salary paid by employer. "
Yes.

"Then since this comes with tax deducted at source, will I need to apply for a rebate while filing taxes ?"

"need?" Depends on your circumstances. The loss (you didn't say
how many shares of A or B, so we don't have totals) reduces your taxes.

"Or tell my employer about the loss so he does the necessary tax adjustments ?"

You might be able to increase the number of exemptions with your
employer.

" Or carry it over to the next FY ?"

When you file 2001 taxes you might get additional refund, but if you
know you are paying more than you will need to, you can have your
withholding reduced.

Good luck! And yes, I have assumed A and B are stocks in different companies and that therefore wash sale rules do not apply.

Best wishes, Chris

Or tell my employer about the loss so he does the necessary tax adjustments ?"

Unles your employer is also your tax advisor, he won't have a clue how to adjust your withholding.

But you could figure out the tax advantage of reporting a loss, for example, $3000 x 15% tax bracket is $450.00/ remaining number of paychecks for the year = the amount your withholding can be adjusted for the balance of the year.

If you'll be in the 27% bracket, $3k x 27% = $810. Continure as above.

Best wishes.

Qs. on deflation and taxes...

Does anyone know ...

If I have vested my stock options, when the market price is high and they plummet under a deflationary environment, I am told I will be paying a ton in taxes.

Is this true ? How will I be paying taxes if I have a loss ?

TIA