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Author: fxiong Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121590  
Subject: Tax return with a big-loss account Date: 1/23/2000 3:49 PM
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Hi, there,

I have two questions, which I need your advice. I invested $60K on my account with Datek during last June, and I totally lost $50K by the end of 1999, which are the results of several hundreds stock trading. That means I have realized the loss.

My questions are:
1. how should I fill the tax return for 1999 because the money I lost is really big, I recalled some Website mentioned "if your losses exceed $3000 (or $$1500 if you file married/seperate), you must carry over (but not back) those losses into the year 2000". what's that mean?

2. If during this year (2000), I get some gains, but not exceed the money which I originally invested ($60K), should I pay tax for these gains? My understanding is that before I get all of my original investment ($60K) back, I don't need pay any tax. For
example, by the end of 2000, my account increase from $10K now to , let's say, $45K (but still less $60K), I don't need pay tax for $45K-$10K=$35K gains, is
that correct?

Thank you very much for your advice.

FX
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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: 25832 of 121590
Subject: Re: Tax return with a big-loss account Date: 1/23/2000 5:35 PM
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<<I have two questions, which I need your advice. I invested $60K on my account with Datek during last June, and I totally lost $50K by the end of 1999, which are the results of several hundreds stock trading. That means I have realized the loss.>>

Just out of curiosity...did you find your way to the Fool area before or after losing your $50k? By now, everybody should know the Foolish Filosophy, but we continue to receive questions from traders. I guess that I just don't understand how the "traders" find their way into Fooldom...especially with so many other tax (and trading) sites out there. Again...just idle curosity. But let's move on...and sorry to hear about your significant losses.

<<My questions are:
1. how should I fill the tax return for 1999 because the money I lost is really big, I recalled some Website mentioned "if your losses exceed $3000 (or $$1500 if you file married/seperate), you must carry over (but not back) those losses into the year 2000". what's that mean?>>

It means that while you may have lost $50k in total (and I assume that these losses are "net"...after realizing all of your gains), you'll only be able to deduct $3,000 in 1999 to offset your other (wages, interest dividends, etc.) income. The remaining $47k in losses will be carried over to your 2000 tax return...to be offset with gains that you (hopefully will) realize in 2000. You can read more about the capital loss rules in the Taxes FAQ area. Check it out at: http://www.fool.com/school/taxes/taxes.htm


<<2. If during this year (2000), I get some gains, but not exceed the money which I originally invested ($60K), should I pay tax for these gains?>>

Nope...your carry over capital losses will eat up the gains...up to $47k in the example above.

<< My understanding is that before I get all of my original investment ($60K) back, I don't need pay any tax.>>

Kinda...sorta...not really. Again, this is explained above and in the Taxes FAQ area.

<< For
example, by the end of 2000, my account increase from $10K now to , let's say, $45K (but still less $60K), I don't need pay tax for $45K-$10K=$35K gains, is
that correct?>>

Basically, yes. But it has nothing to do with your original investment. It has only to do with your capital loss carryover.

TMF Taxes
Roy


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