|
Post by tingtongtung on Dec 7, 2017 15:03:36 GMT -5
I know its off-topic.. What are the chances of this (only FIFO) going thru? What exactly is being accomplished by this crazy rule? Just when the rule of brokerages providing the cost basis became the norm (which is good), a new crazy rule.. I have so much losses here (I sold some about a month before approval for 5 digit losses (only about 40% of total :-( ), got in and out after approval to make some money, and again bought some for longer term). If a former life I was a full-time tax professional, although focused mainly on international taxation of multi-national corporations. The only way to know what is in a pending bill is to get the latest mark-up from the Congressional Register and read it, and that is beyond the ability of all but the most masochistic tax lawyers. From what I know, and admittedly I have not read the latest markup, this provision is still in the bill and based on my experience I would say that it is likely to make it into the joint committee reconciliation version. Likely = educated guess, not fact. Since most stocks tend to increase in value, forcing all taxpayers to use FIFO will increase revenue to the US Treasury since first-in shares tend to have a lowe tax basis. This provision partially off-sets the revenue declines buried elsewhere in the tax reform provisions. Remember that the Senate has rules that require budget neutrality in any tax legislation even though they manage to break that rule on a regular basis regardless of which party is in the majority. As there is no appetite to increase the deficit on either side of the aisle, I expect the final bill will contain the FIFO requirement. The IRS likes the FIFO requirement because they really don't have a good way to track the original tax basis of shares accumulated over time, and this is especially so if a company has gone through mergers, spin-offs, splits, reverse splits, and so on. If everybody has to use FIFO, then the IRS can easily build a database of all stock transactions so they will know exactly what your basis should be as a way to detect cheating. This is one of the last unplugged loopholes that wealthy individuals take advantage of on a regular basis, and with the individual AMT going away as part of reform, they want to be able to collect every penny they can from wealthy taxpayers. Hey Matt, I appreciate you for taking time to answer my question.. I enjoy reading your comprehensive unbiased (sometimes glass half empty!) comments.. I'm an engineer, and I had no idea what/how a drug company goes thru to get its product released. NDA for me was Non-Disclosure Agreement, now I know it means something else as well! It's something I learned from all you awesome people here. But, I dont want to get into the dirty political arena (neither interested nor willing to :-)). But, I have to ask you one thing. Is FIFO fair? Doesn't it infringe upon a common person's decision making ability? Isn't it something like, if you see a sale (in this case, a LIFO instead of FIFO), you are not authorized to buy it? I'm not going to ask anymore off-topic questions.. Sorry!
|
|
|
Post by dreamboatcruise on Dec 9, 2017 20:11:17 GMT -5
tingtongtung ... Engineer to engineer, shares in a company are fungible. If not to prevent truly creating fake shares (which some like to think happens anyway) they wouldn't have to be numbered. At any given time you simply own a pool of shares that convey a certain percentage rights of ownership and control. The recognition of profits or loss when you go from X% ownership to Y% ownership is a rather arbitrary accounting issue. I wouldn't view one way as "fairer" than another in the abstract. One might say changing the rules of the game mid play is inherently unfair, but changes to tax laws are always that. Some players will be hurt and others will benefit. [entirely personal opinion]
|
|
|
tax loss
Dec 10, 2017 7:37:31 GMT -5
via mobile
Post by shake34 on Dec 10, 2017 7:37:31 GMT -5
If I sell from my brokerage account for the tax loss can I buy back in my roth ira or do I still have to wait 31 days?
|
|
|
Post by sportsrancho on Dec 10, 2017 8:25:43 GMT -5
If I sell from my brokerage account for the tax loss can I buy back in my roth ira or do I still have to wait 31 days? Wash Sale Rule The wash sale rule disallows capital losses if you repurchase the same security within 30 days of selling it. That is bad for unsheltered investments, but of no consequence to traders who do all of their buying and selling in an IRA, since you don't claim capital losses in an IRA. However, you cannot skirt the wash sale rule by selling a stock in your regular account for a loss and buying it back within 30 days in your IRA account. The IRS calls this a wash sale and will disallow your claim of loss in your regular account. finance.zacks.com/can-sell-rebuy-stocks-same-day-ira-8443.html
|
|
|
Post by matt on Dec 10, 2017 9:51:12 GMT -5
But, I have to ask you one thing. Is FIFO fair? Doesn't it infringe upon a common person's decision making ability? Isn't it something like, if you see a sale (in this case, a LIFO instead of FIFO), you are not authorized to buy it? You misunderstand FIFO and LIFO. It is not a matter of whether you can execute the sale or not, it is a matter of how you will measure the tax consequences. Example: If you buy 100 shares at $1, you have a tax basis in those shares of $100. Then, a while later, you buy 100 more shares at $1.50 so you tax basis in that lot of shares is $150. Finally, the price moves to $2 and you decide to liquidate half your position. Under current law you can track each share certificate or share lot and specify which ones you sold, or you can use FIFO or LIFO or an average. Under FIFO, the IRS will assume that you sold the $1 shares and still own the $1.50 shares, so your taxable gain reportable is $100 and you have a remaining basis of $150. Under LIFO you sell the $1.50 shares, so your taxable gain is $50 and your remaining basis is $100. Under average cost, your average tax basis is $1.25 and your recognized gain is $75, and your remaining basis is $125. Regardless, the remaining tax basis that is not used to calculate gain is there to offset profit a future sale. The IRS would not be controlling if you sell or when you sell, only when you have to report the gain or loss. It has no effect on when you buy or at what price you buy. As for "is it fair" you don't want to open that can of worms. Is it fair that you get a different tax treatment on capital gains than on ordinary income? Is it fair that homeowners get to deduct mortgage interest and property taxes but apartment dwellers do not get a deduction for the interest and taxes their landlord pays to carry a property? Is it fair that actuarial tables are the same for men and women even though women, on average, live longer than men? Is it fair that US corporations pay tax on their worldwide income while virtually every other country in the world only taxes their corporations on their domestic profit? Is it fair that people in some tax brackets pay higher rates than others? Is it fair that Congress passes laws to incentivize certain behaviors, like investing in R&D, and as soon as companies increase their R&D spending and start to take advantage of the credit, the IRS imposes rules that act as a disincentive to claim the credit? Was it fair that the federal government passed Section 936 to create tax incentives for companies to invest in Puerto Rico, and was it fair when they repealed Section 936 resulting in skyrocketing unemployment and insolvency of Puerto Rico itself? The point is that tax policy is not now, and never has been, about fairness. Tax policy is about raising revenue for the US Treasury and it about incentivizing certain behaviors by the citizens (like increasing home ownership and decreasing sales of "gas guzzler" cars) and it is about the election winners rewarding political support. Once you move away from a single rate flat tax on every taxpayer, tax policy ceases to be just about revenue. Whether you think any particular tax incentive makes for good public policy is a highly individual decision.
|
|
|
Post by mnkdfann on Dec 10, 2017 11:24:52 GMT -5
If I sell from my brokerage account for the tax loss can I buy back in my roth ira or do I still have to wait 31 days? Wash Sale Rule The wash sale rule disallows capital losses if you repurchase the same security within 30 days of selling it. That is bad for unsheltered investments, but of no consequence to traders who do all of their buying and selling in an IRA, since you don't claim capital losses in an IRA. However, you cannot skirt the wash sale rule by selling a stock in your regular account for a loss and buying it back within 30 days in your IRA account. The IRS calls this a wash sale and will disallow your claim of loss in your regular account. finance.zacks.com/can-sell-rebuy-stocks-same-day-ira-8443.htmlThe rest of the story: "When you have a disallowed wash sale loss, the loss doesn't just vaporize (except in certain instances with an IRA--to be explained later). Instead, the disallowed loss is added to the tax basis of the substantially identical securities that triggered the wash sale rule. When you eventually sell those substantially identical securities, the extra basis from the disallowed wash sale loss reduces your tax gain or increases your tax loss. In effect, the disallowed loss becomes a deferred loss that is taken into account when you sell the substantially identical securities." www.marketwatch.com/story/avoiding-the-wash-sale-rule-at-yearend-1321577774029
|
|
|
Post by babaoriley on Dec 10, 2017 16:53:48 GMT -5
So here's a sort of interesting story. I have a lot of one ridiculously speculative stock (not MNKD) in a tax deferred account, and not too much in any taxable account. So I sold some of the shares in the tax deferred and bought in the taxable (all in Schwab). Did this within 5 mins of each other. I think I sold for about .205 and bought for about .208. The reason, I have some major losses in my past in taxable accounts (where have all the zeros gone), so if this little currently hideous gem ever gets polished, I'd like to have some tax free gain. I get a call from Schwab within the hour questioning this move. I explain why, and I ask what's the big deal. First he says, I could have transfered it out of one and into the other - he didn't think that out well, as, although I'm able to get money out of the tax deferred in my dotage, that would have triggered tax (hurts extra bad when you get taxed from selling something you're down about 75% on). Then he says, well, the SEC sometimes sees these types of trades and thinks you're trying manipulate the market! And we want to make sure you understand you're taking that risk when you do such a transaction! I was so proud to be categorized as a manipulator of stock!! And all along, I thought you had to be a smart person to do that! I just want to warn you all that you may be dealing and corresponding with a big time stock manipulator. So proceed accordingly.
|
|
|
Post by akemp3000 on Dec 10, 2017 17:14:34 GMT -5
So here's a sort of interesting story. I have a lot of one ridiculously speculative stock (not MNKD) in a tax deferred account, and not too much in any taxable account. So I sold some of the shares in the tax deferred and bought in the taxable (all in Schwab). Did this within 5 mins of each other. I think I sold for about .205 and bought for about .208. The reason, I have some major losses in my past in taxable accounts (where have all the zeros gone), so if this little currently hideous gem ever gets polished, I'd like to have some tax free gain. I get a call from Schwab within the hour questioning this move. I explain why, and I ask what's the big deal. First he says, I could have transfered it out of one and into the other - he didn't think that out well, as, although I'm able to get money out of the tax deferred in my dotage, that would have triggered tax (hurts extra bad when you get taxed from selling something you're down about 75% on). Then he says, well, the SEC sometimes sees these types of trades and thinks you're trying manipulate the market! And we want to make sure you understand you're taking that risk when you do such a transaction! I was so proud to be categorized as a manipulator of stock!! And all along, I thought you had to be a smart person to do that! I just want to warn you all that you may be dealing and corresponding with a big time stock manipulator. So proceed accordingly. Great story and warning! Would you be so kind as to manipulate MNKD stock up big this week?
|
|
|
Post by tingtongtung on Dec 10, 2017 18:43:55 GMT -5
But, I have to ask you one thing. Is FIFO fair? Doesn't it infringe upon a common person's decision making ability? Isn't it something like, if you see a sale (in this case, a LIFO instead of FIFO), you are not authorized to buy it? You misunderstand FIFO and LIFO. It is not a matter of whether you can execute the sale or not, it is a matter of how you will measure the tax consequences. Example: If you buy 100 shares at $1, you have a tax basis in those shares of $100. Then, a while later, you buy 100 more shares at $1.50 so you tax basis in that lot of shares is $150. Finally, the price moves to $2 and you decide to liquidate half your position. Under current law you can track each share certificate or share lot and specify which ones you sold, or you can use FIFO or LIFO or an average. Under FIFO, the IRS will assume that you sold the $1 shares and still own the $1.50 shares, so your taxable gain reportable is $100 and you have a remaining basis of $150. Under LIFO you sell the $1.50 shares, so your taxable gain is $50 and your remaining basis is $100. Under average cost, your average tax basis is $1.25 and your recognized gain is $75, and your remaining basis is $125. Regardless, the remaining tax basis that is not used to calculate gain is there to offset profit a future sale. The IRS would not be controlling if you sell or when you sell, only when you have to report the gain or loss. It has no effect on when you buy or at what price you buy. As for "is it fair" you don't want to open that can of worms. Is it fair that you get a different tax treatment on capital gains than on ordinary income? Is it fair that homeowners get to deduct mortgage interest and property taxes but apartment dwellers do not get a deduction for the interest and taxes their landlord pays to carry a property? Is it fair that actuarial tables are the same for men and women even though women, on average, live longer than men? Is it fair that US corporations pay tax on their worldwide income while virtually every other country in the world only taxes their corporations on their domestic profit? Is it fair that people in some tax brackets pay higher rates than others? Is it fair that Congress passes laws to incentivize certain behaviors, like investing in R&D, and as soon as companies increase their R&D spending and start to take advantage of the credit, the IRS imposes rules that act as a disincentive to claim the credit? Was it fair that the federal government passed Section 936 to create tax incentives for companies to invest in Puerto Rico, and was it fair when they repealed Section 936 resulting in skyrocketing unemployment and insolvency of Puerto Rico itself? The point is that tax policy is not now, and never has been, about fairness. Tax policy is about raising revenue for the US Treasury and it about incentivizing certain behaviors by the citizens (like increasing home ownership and decreasing sales of "gas guzzler" cars) and it is about the election winners rewarding political support. Once you move away from a single rate flat tax on every taxpayer, tax policy ceases to be just about revenue. Whether you think any particular tax incentive makes for good public policy is a highly individual decision. Matt, Sorry, I didnt frame my question right! I forgot to state my assumptions.. I know LIFO, by ID, etc.. will not be banned. I do it all the time :-) What I meant was not being able to make use those results during tax time (create losses to offset profits, create more losses to offset ST profits, etc, without having another hurdle/headache of wash sale rules). Look at MNKD. Is there any LT holder with FI (First In) shares in profit (unless you first bought in last year)? Lots of people (including me) have invested here. If you had done dollar cost ave, you would have dug a hole all the way to the core of Earth :-) One would smartly get rid of high priced ones to create losses, and sell on news to make money (taking care of wash rules). I'm a believer in MNKD, and I have a bigger core position now than before. But when it was going up to 6, I did sell a few times to make some money. I have reduced my cost basis from >35 to single digits without hitting wash sale rules, and made money and increased my holdings of MNKD. This would not be possible with the new rules. That's what I was saying.. I understand about "notion of fairness" - depends on the context. When credit card rules were changed to make it compulsory for the banks to always apply the payment to the highest interest loan first, it was considered fair for a lot of people (in fact it was for low income people). But, banks lost their biggest money making method, and that eliminated a lot of advantages for for churners (who were making money from 0% infinite time credit card balance transfers, generous incentives for opening card, etc :-)) If you are smart, and you take advantage of the rules without breaking any laws, thats good as per Capitalism. Isn't it? The fair/unfair list you stated... I agree 100%. I wish it would be like "you make $100, you give $30 in tax". But, it would never work. You have so many variables in the picture. You have Intuit/HRB/other companies just to decode and file tax! Jobs created by them, taxes filed by those job holders, etc, etc - its a vicious circle. Just my opinion.. Its like religion. Whos' religion is the best? Haha, it so quickly goes way out of scope of discussion :-)
|
|