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Strategies & Market Trends : Stock Attack -- A Complete Analysis
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To: Chris who wrote (39313)12/26/2000 2:55:28 PM
From: Berney   of 42787
 
Chris, I think the issue is being made overly complex.

Only one gain or loss number comes forward from the Schedule D to the Form 1040. If it is an overall loss, only $3,000 can be deducted with the balance carried over to the future.

The reason for separating the capital gains between long term and short term on the Schedule D is that any long term gains are subjected to a preferred tax rate of 20% for those in a 28% tax bracket or above.

So, there are four permutations and combinations:

1. Only net Long Term Gains (the Alice in Wonderland scenario): The net gains are taxed at 20% (10% for those in a 15% bracket).

2. Only net Short Term Gains (the Alice in Wonderland Part II scenario): The net gains are taxed as ordinary income.

3. Net Long Term Gains and Net Short Term Losses (Probably see a lot of these): The net short term losses offset the long term gains and the balance: a) if positive, gets taxed at the preferred tax rate, or b) if negative, is deducted to the extent of the $3,000 limitation.

4. Net Long Term Losses and Net Short Term Gains (these folks need to buy a good book on TA): The net long term losses offset the short term gains and the balance: a) if positive, gets taxed as ordinary income, or b) if negative, is deducted to the extent of the $3,000 limitation.

Hope this helps,

Berney
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