DlphOrc, longs are longs and should be considered strictly as long-term investments. . . holding through past years end. . . and not paying attention to market corrections or otherwise, unless we have a total wash out of the economy and nobody sees that coming any time soon. . . .so we save the taxes and hold longs long.
Now, in addition to those untouched long portfolios. . .is another portfolio. .. a trading portfolio. . . .one that may have all of the same stocks that are in the long port. . .but also a bunch of speculative postitions, etc. When we trade in and out of issues, it is only this additional trading portfolio that is touched. . . .the long-term gains in our original long ports remain untouched. . . and as we gain in our trading portfolios, we keep adding to our long portfolios. . . taking short term gains and placing them into long positions. .. so that further gains from the increased capital carry over years end.
And that is why we "take defensive posturing", rather than do as daytraders and "go all cash" . . .shorting QQQ is one strategy used here often . . our defensive strategy is primarily in our trading portfolios. . .which can go all cash once or twice a year as need be, but still not affect our long portfolios. . .thus not causing an undue tax burden.
The only time we must go all cash in trading is when we are in volatile internets, and are about to experience a 50% or more loss in principal. Then again, if you find yourself holding on a major market sell-off. . .you could sell low. . .then wait the required 30 days and buy back even lower, as in the case of August. . . then by holding through the end of the year, you can claim the tax loss, but carry forward any potential gains.
With our trading portfolios, we merely trade to make gains. . . and we worry about paying Uncle Sam when the time comes.
Now some of us will file as "professional traders", thus receiving the deduction for memberships, commissions, subscriptions, etc. . . but you had better be able to show a full year of daily trading. . . if you only show a partial year, you will lose the deductions, since the IRS will say you are not a professional, but rather trade as a hobby. . . and that can cost you dearly. . . others will simply file capital gains with a Schedule A or D or whatever. . . .either way, it is best to consult with a tax advisor BEFORE the end of the year. There are plenty of ways of "playing" the tax game, so that you can come out a winner in the end, rather than a victim. But that is not what I am here to teach.
I would, however, love to know about any software that can take in all our trades from a spreadsheet and assist us in tax preparation. . . .so that we do not have to enter each and every trade one by one. . .but rather paste them all into a spreadsheet, then have the program do the calculations and properly formatting for filing. Or even better. .. .a brokerage that can output IRS ready documents!! If someone knows of any such things, please advise. . .otherwise, these are good hints to throw the way of Intuit or H & R Block.
Rande Is |
