how does tax wok when you buy and sell stocks?
Posted on Dec 14, 2011 with Comments 4
padilla6j23 asked:
what if i buy a stock and sell and make a profit. i know that i have to be taxed on the profit but what if i use all the money to buy more stock? what happens then?
Truman Limage
what if i buy a stock and sell and make a profit. i know that i have to be taxed on the profit but what if i use all the money to buy more stock? what happens then?
Truman Limage
Filed Under: United States
You still owe the tax.
The IRS doesn’t care what you spent the money on–their hand is out.
If you end up owing more than $1000 at tax time you can get hit with an 8% estimated tax penalty for failure to pay-as-you-go with quarterly estimated tax payments.
you will receive a 1099B at year’s end reporting your ‘proceeds’ which means all that is being reported to IRS is the money you r’cd from selling the stock
you need to have the purchase dates and prices of all you sold to calculate your actual gain or loss
taking the money to buy other stocks has no bearing, you will need to make sure you report what is on your 1099B as proceeds less the cost
Sch D
Tro and the Tax Lady are correct. Another thing to keep in mind is wash sales. If you purchase a stock, sell it, and repurchase the same stock within 30 days, there is what is considered a wash sale. You carry forward your original basis in the stock and do not report any of the loss from sale of the security.
If you sell at a profit, you pay the tax no matter what you do with the money.