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

To: Kaye Thomas who wrote (1509)	12/26/1998 3:20:00 PM
From: Stu E.	Read Replies (1) \| Respond to of 5810

Mr. Thomas, is a net long term loss deductible dollar for dollar or only partially deductible? My daughter has a $2900 long term loss and a $300 LT capital gain distribution. How will the net $2600 long term loss be treated on her tax return? Thanks in advance for your assistance, hopefully before 12/31.

To: Kaye Thomas who wrote (1509)	1/10/1999 10:26:00 PM
From: Richard Joslin	Respond to of 5810

The issue of worthlessness can bring unexpected tax results. Long positions: For completely worthless long positions, the loss from the worthlessness is deemed recognized on the LAST day of the investor's tax year rather than the date of worthlessness. For investors who have determined that a long stock position is worthless, they may be surprised to find out that the tax law will continue to age the holding period until the last day of the tax year. Section 165(g) provides that a worthless security is deemed to be sold on the last day of the tax year. Investors who are concerned about avoiding age their positions to long term should seek to sell such long positions rather than to rely upon worthlessness. Short Positions: The 1997 tax law now requires GAIN RECOGNITION when a short position becomes "substantially" worthless without regard to whether or not the investor physically closes the short sale. There is currently no IRS guidance as to what "substantially" means. For example, compare the difference between a short sale of XYZ stock when trading at $30 vs. a short sale of XYZ stock when trading at $1.00. If the current market value of XYZ is $0.50, is the $30 short sale substantially worthless? What about the $1.00 short sale? In any event, short sales that were substantially worthless before the law was enacted (Aug 9, 1997) are exempted from the provision. However, when a short position becomes COMPLETELY worthless, gain recognition cannot be avoided nor deferred any longer.

To: Kaye Thomas who wrote (1509)	3/30/1999 12:24:00 PM
From: jbn3	Read Replies (2) \| Respond to of 5810

re: figuring capital gains on gifts Kaye, First, thank you for one of the most useful (and generous) contributions to netizens that I have ever found! Your web site is superb, as is this thread! Situation: my in-laws gifted my wife 250 shares of Exxon recently. She would like to sell and use the proceeds for other investments. Her plan may be impacted by the amount of tax due if she sells. * their cost basis was about $5.00 per share; * share price at time of gift was about $75 per share; From reading the material on your web site, it seems to me a) if my wife sells, she will pay a long term capital gains rate on the difference between sale price and ORIGINAL acquisition costs by her parents. Is that true? b) if 'a' is true, does it make any difference as to when my wife sells the stock (assuming the price never varied again); i.e. the price at the time of transfer will never play a role in her basis, nor will the date of the transfer ever play a role in her basis? c) if the gift is continually evaluated at her parents' original cost basis, could they have gifted 4,000 shares (4,000 x $5 /share = $20K) without paying a gift tax? d) her parents inherited the stock.... does that impact the cost basis for them or for her? I'm sure that this has probably been answered before, but I have been reading all morning and haven't found it addressed. Thanks once again, both for your help and for the superb site! bachman nabors