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how would a sell-off of say $5000.00 of simple stock be taxed? Would this count as straight income for the year?

Generally, no. First, you are generally only taxed on the gain---the difference between the original cost and the price at which you sell. Second, it depends on how long you've held the stock. Each state may have its own special rules, but the federal government taxes short-term (held less than 1 year) and long-term (held 1+ years) gains differently. ST gains are taxed like regular income; LT gains are taxed at a special rate (15%, I think). Here in Mass (where I live), the state charges an additional 5% tax on LT gains, 12% tax on ST gains.

How is capital gains tracked?

Basically, the gain is the difference between the cost and the sales price. But, you'll need to know more to file a tax return. Check out publication 550:

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