Investing 102

[GregWeld]

Originally Posted by gearheads78

Well it now been a little over a year since I started reading this thread and about 9 months since I rolled over my 401K and started a IRA and opened a roth. I had about $25,000 to put in and my account currently sits about $27,000. I was quite a bit higher a few months ago but about 20% of my holdings are in two big oil stocks that have taken me down a lot. I'm not worried about either one bit since I have a 20-25 yr time line.

I just want to say how happy I am they this thread is hear and the information Greg and others have shared. Its going to change mine and my families future.

I do have one quick question. This week I opened a new taxable account since I can add to the IRA and the Roth is maxed for the year. Tax wise is there any rule about re-buying a stock you are taking a loss deduction on?

Lets say for example I own and love XYZ stock at the end of next year. It' down but I believe in it and I still want to own it. Can I sell it to take the loss but jump right back in it?

Joe.... You are why I pour my heart and soul into this thread. It's my Democratic way of being a Republican... in other words - I like to give back. I'm so happy you're having some success!


Now -- I have at least 2.5ish million in "oil and oil related" stocks. They're not helping my annual performance one bit. I'm getting ready to buy more. I think there is more downside so I'm waiting until I'm pretty certain they've hit bottom - maybe another quarter. But the dividend payouts are JUCIY and getting better by the day!!

OKAY -- On to the larger picture/question!


The rule is called "a wash sale". Yes you can sell anytime you want to - remembering to take the loss in the tax year you're in - and take a loss. There are tax rules about the size of the loss etc --- and you NEED TO DISCUSS this briefly with your tax guy so you have a very clear understanding what that all looks like. Like most things - it's never as simple as you "hear".

Okay -- the "WASH SALE" rule says you must wait 60 days or more before you buy the same stock you just took a loss on if you want to be able to write off the loss.

There is NO RULE that says you can't sell Chevron (CVX) at a loss on Friday and buy Exxon (XON) on Monday. They're not the same company.




SO HERE'S A VERY IMPORTANT NOTE - Make damn sure you understand what a capital loss can be written off against!!! It does NOT reduce ORDINARY INCOME dollar for dollar... and lots of people think that's the way this works! It does NOT! Capital gains are offset with capital losses... and there's a way that is done according to tax law.



Capital losses from the sale of stock are claimed on Schedule D, which is attached to your Form 1040 tax return. Capital losses offset capital gains of the same type, then capital gains of the other type, and then other income. So, if your stock loss is a short-term loss, it first offsets your short-term gains for the year. Any remaining short-term loss would then be used to offset long-term gains. Finally, if your loss from the sale of stock was greater than the total of your combined long- and short-term capital gains, up to $3,000 in capital loss can be used as a deduction against other income. - See more at: http://wiki.fool.com/How_Much_to_Wri....IXvneuzk.dpuf