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

To: Cents who wrote (765)	3/16/1998 11:19:00 AM
From: Spots	Read Replies (1) \| Respond to of 5810

>>I thought capital losses were used to offset the gains, and that the net loss were deductible up to $3000 a year with anything more carried over to the following year. Am I correct to think so? Yes, this is correct (although you offset first within capital class, now long-term, mid-term, short-term). And you can use FIFO accounting or sell designated shares of your holdings to determine gain/loss on a sale (designating shares has its own set of rules; it also depends on the asset class--eg, mutual funds have different rules again). BUT the wash sale rule has nothing to do with this. The wash sale rule simply says that if you exit a position and reestablish it (or establish a "substantially identical" position) within the 61-day window, a loss on the position is deferred until you close the reestablished position. There is one way I can think of that designating shares (either FIFO or otherwise) could affect a wash sale. If you were to designate shares of the position you exit that showed a GAIN, then the wash sale rule doesn't apply, and you would have to pay tax on the gain. Example: XYZ is at 15; I own 100 shares at 10 and another 100 shares at 20. If I sell 100 XYZ and then buy 100 within 30 days (or had bought a new 100 within the past 30 days or on the same day) then: If I designate that I sold the shares I own at 20, there is a wash and my loss is deferred until I sell the 100 I acquired within the 61-day window. If I designate that I sold the share I own at 10, there is a gain which I must report and no wash sale. To designate sale of a particular lot, you have to instruct your broker in writing in a timely way which shares you're selling and be able to document that. Some brokers will put it on the ticket. If you don't do that, the IRS will accept FIFO (and probably force you to use it). The other flags were (a) that you said option losses and commissions were DEDUCTABLE when what they are are CAPITAL LOSSES, and (b) there were enough things suspect in you post from this taxman that it would be prudent to get different advice. BTW, I am STRICTLY an amateur who does his own taxes. There are professionals posting here who know far better than I. These are strictly my own opinions and impressions. Best of luck, Spots