WHEN WALL STREET SNEEZES - -
**WHEN WALL STREET SNEEZES**
It must still be true that when Wall Street sneezes, foreign bourses catch cold. Foreign traders still suffer psychological symptoms from any U.S. decline and U.S. traders in foreign stocks often sell both domestic and foreign stocks when the Dow plunges. The strongest-performing foreign ETFs nose-dived when there was a sell-off in the U.S. a few of days ago—then rose again when the US market went up. .
This pattern will probably continue. If you react quickly by selling on bad days and re-buying if the market appears to recover, you not only will generate a lot of commissions for your broker, but it can be a hell of a job when tax time comes.
REPORTING CAPITAL GAINS AND LOSSES:
It is further complicated if you have both short-term and long-term gains. You may have bought Widgets, Inc. incrementally over several years, then finally decided to dump about half of it all at once. Now you have to go back and relate each sale to a purchase date. If you bought 100 shares ten times over the years and have 1000 shares and sell 350 one day and another 300 a month later, you need to split the 50 odd shares between sale number one and sale number two. If you have reinvested dividends and capital-gain reinvestments, that makes even more periods of acquisition to factor in.
AVERAGE COST OR FIRST-IN, FIRST-OUT?
You have to choose between reporting on an ‘average cost’ basis or on a first-in, first-out basis—or some other less common acceptable method. Sometimes a mutual fund provides you with an average cost. If they don’t then you must make the tedious calculation if you choose that method.
For an excel worksheet which calculates average cost go to
Average Cost
CAN I USE BOTH METHODS?
If you use the average cost method for a mutual fund, you must use it for all sales in that fund—but can use other methods for sales in another fund in the same family of funds or other mutual fund companies.
DO I HAVE TO LIST EVERY SINGLE TRANSACTION ON MY TAX RETURN?
A strict interpretation of the IRS guidelines might require a separate entry for numerous fractional share purchases in a dividend and capital gain reinvestment program. To avoid this, I usually attach copies of brokerage statements to tax returns with numerous trades and lump a lot of trades together with ‘various’ as the acquisition date. I split the transactions between Long-term gains, long-term losses, short-term gains and short-term losses. (If more than one broker or mutal fund is involved, the splits have to be made separately for each of them.)
LINKS and References – go to
IRS Refernences
TO SUBSCRIBE:
RSS:
This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.
It must still be true that when Wall Street sneezes, foreign bourses catch cold. Foreign traders still suffer psychological symptoms from any U.S. decline and U.S. traders in foreign stocks often sell both domestic and foreign stocks when the Dow plunges. The strongest-performing foreign ETFs nose-dived when there was a sell-off in the U.S. a few of days ago—then rose again when the US market went up. .
This pattern will probably continue. If you react quickly by selling on bad days and re-buying if the market appears to recover, you not only will generate a lot of commissions for your broker, but it can be a hell of a job when tax time comes.
REPORTING CAPITAL GAINS AND LOSSES:
It is further complicated if you have both short-term and long-term gains. You may have bought Widgets, Inc. incrementally over several years, then finally decided to dump about half of it all at once. Now you have to go back and relate each sale to a purchase date. If you bought 100 shares ten times over the years and have 1000 shares and sell 350 one day and another 300 a month later, you need to split the 50 odd shares between sale number one and sale number two. If you have reinvested dividends and capital-gain reinvestments, that makes even more periods of acquisition to factor in.
AVERAGE COST OR FIRST-IN, FIRST-OUT?
You have to choose between reporting on an ‘average cost’ basis or on a first-in, first-out basis—or some other less common acceptable method. Sometimes a mutual fund provides you with an average cost. If they don’t then you must make the tedious calculation if you choose that method.
For an excel worksheet which calculates average cost go to
Average Cost
CAN I USE BOTH METHODS?
If you use the average cost method for a mutual fund, you must use it for all sales in that fund—but can use other methods for sales in another fund in the same family of funds or other mutual fund companies.
DO I HAVE TO LIST EVERY SINGLE TRANSACTION ON MY TAX RETURN?
A strict interpretation of the IRS guidelines might require a separate entry for numerous fractional share purchases in a dividend and capital gain reinvestment program. To avoid this, I usually attach copies of brokerage statements to tax returns with numerous trades and lump a lot of trades together with ‘various’ as the acquisition date. I split the transactions between Long-term gains, long-term losses, short-term gains and short-term losses. (If more than one broker or mutal fund is involved, the splits have to be made separately for each of them.)
LINKS and References – go to
IRS Refernences
TO SUBSCRIBE:
RSS:
This information is not intended to be advice to the recipient. In compliance with Treasury Department Circular 230, unless stated to the contrary, any Federal Tax advice contained in this Blog was not intended or written to be used and cannot be used for the purposes of avoiding penalties.
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