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Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: Colin Cody who wrote (223)	11/28/1997 11:08:00 PM
From: Nittany Lion	Read Replies (2) \| Respond to of 5810

Colin, I posted this last week to another thread in regards to this subject: <<From CCH, 97FTG Para. 5484 Substantially Identical Securities. "The wash sale provisions apply to the denial of a loss if the securities acquired are substantially identical to those sold or disposed of. For example, when a taxpayer sells a stock purchase warrant at a loss and, within 30 days, purchases stock in the same corporation, the wash sale rules apply only where the relative values and price changes are so similar as to make the stock warrant substantially identical to the newly acquired stock." >> It appears to me that the issue comes down to "relative value". And, in the situation that WSB referred the stock is selling for $6 and the warrant $1(warrant plus $5 = 1 share of stock). With everything I've read I'm still not sure, although I think it could be argued either way. Gary

To: Colin Cody who wrote (223)	1/4/1998 10:07:00 PM
From: DDS-OMS	Read Replies (1) \| Respond to of 5810

Colin, Read through all the posts on this thread this evening--you have been a tireless contributor--thanks! In the post I'm referencing, you stated that " For stock obtained through a warrant the holding period starts with the acquisition of the warrant." My CPA had told me the holding period starts with the acquisition of the stock (or starts with the conversion of the warrant. I much prefer your contention for the following reason: In a private placement on Dec 26, 1996 I bought 300K of common with attached 300K warrants to buy the common at $0.55 for 1 year. The warrant was not separately tradeable. I exercised these 300K warrants in November and immediately sold 60K of the common acquired by exercising to cover the cost of exercising the warrants. This sale results in short term cap gains, but now 1 year has passed since acquiring the original common and warrants, and if what you say is correct, I can sell those shares acquired by exercising the warrants and have Lt cap gains vs Short term cap gains. I would really like to sell the 240K shares remaining from the exercisment, but if it is short term cap gains, the resultant 47.3% Fed and state taxes would make me hold and risk the stock declining in value rather than take the Fed and state on as equal partners in this transaction. Long post, but can you cite where you found that the holding period starts with the warrant acquisition rather than the conversion? Regards and thank you, Gary