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To: Casaubon who wrote (65146)	12/23/2000 10:40:31 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 99985

Casaubon, quite possible, those guys had options at $60, when th stock was $120 they exercised the options, but had to borrow to exercise these, and the broker was quite happy to lend them the money, when they exercised the options, they had to recognize a gain, or at least some of that difference was "credited" to them as compensation (and reported as such to the IRS), they did not sell enough at $120 to cover their debt and now the stock is sold from under them at $40 (the margin man calling), while they can take a deduction of $3000 on their loss, they still need to pay taxes on their "recognized" compensation, and that might be much greater than the $3000 cap loss they can recognized (if they did not have other compensating gains). Zeev

To: Casaubon who wrote (65146)	12/24/2000 12:32:30 AM
From: marginmike	Read Replies (1) \| Respond to of 99985

Many people had paper wealth, and borrowed against stocks they owned. They would rather not sell the stock and pay taxes. The market then came down and those dollars that were borrowed against were gone. However the sale may have resulted in a net capital gain. IE: If you bought Qcom at 10 and rode it to 200 last year your 10k would be 200K. You borrowed 100K from that and spent it. Your stock is now worth 84K, and if sold in a margin call you now have a 80-100K tax bill leaving you in the whole for 16K, and that is not a CMGI situation. There are also many whom exersised options and owe money on that transaction at the exercise price. The stock however is not worth the exersice price, and you now have a tax bill. I posted a MSFT article where that is happening to MSFT employees earlyier today. Check it out.

To: Casaubon who wrote (65146)	12/24/2000 12:39:05 AM
From: B.K.Myers	Read Replies (1) \| Respond to of 99985

Causabon, Here is one way that you can loose money and still have a tax bill. If you purchased a mutual fund at a higher price than it is currently trading for, you have suffered a loss. However, that mutual fund has probably distributed capital gains and dividends during the past year. You will have to pay tax on the capital gains / dividends that were distributed to you (even if you reinvested those proceeds). Since you have not sold your mutual fund, you do not get a tax write-off for the decline in its market value. I wonder how the average investor is going to react when the receive their annual mutual fund statement showing that they lost money last year and a 1099 showing that they made money and have to pay tax on that money. I don’t know if we have ever seen a situation like this before. B.K.