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Eriberry
LIF Infant
Member since 5/06 99 total posts
Name:
Erica
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selling stocks - tax question
I received stocks for IBM and Exxon when i was a little kid. I always had the dividends reinvested to purchase more shares. I'm going to sell off the reinvested shares for when we buy a house. My question is, how will I be taxed on this?
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Posted 8/18/08 11:26 AM  |
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ILJ619
LIF Adult
Member since 6/06 1985 total posts
Name:
Irene
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Re: selling stocks - tax question
It sounds like you held them "long" so you will not be taxed as heavily as if you held on to them for a short amount of time. But you really need to talk to your accountant because it depends at what price the shares where purchased at and the price you ultimately sell it at. So it depends on your profit and tax bracket.
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| Posted 8/18/08 1:52 PM |
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LIMOMx2
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Member since 5/05 24989 total posts
Name:
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Re: selling stocks - tax question
I was taxed on what the shares where when the person bought them.
I was given Exxon when I was young as a gift from my Aunt who had them since it first was a stock.
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| Posted 8/18/08 1:54 PM |
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Eriberry
LIF Infant
Member since 5/06 99 total posts
Name:
Erica
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Re: selling stocks - tax question
thanks! and this is taxed during tax time right, not when you cash them in?
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| Posted 8/18/08 2:02 PM |
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LIMOMx2
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Member since 5/05 24989 total posts
Name:
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Re: selling stocks - tax question
Posted by Eriberry
thanks! and this is taxed during tax time right, not when you cash them in?
Correct. During Tax time.
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| Posted 8/18/08 2:03 PM |
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Erica
LIF Adult
Member since 5/05 11767 total posts
Name:
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Re: selling stocks - tax question
as long as you have had them for 2 years, they are taxed as capital gains, which is lower than income. You should hold about 15% of the profit somewhere until April comes and you have to pay your taxes.
If you can get the information on when and how much was bought it will help when you file. Especially the reinvested shares - since the profit won't be as much, so you will be taxed less.
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| Posted 8/18/08 5:01 PM |
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CookiePuss
Cake from Outer Space!
Member since 5/05 14021 total posts
Name:
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Re: selling stocks - tax question
Posted by Eriberry
I received stocks for IBM and Exxon when i was a little kid. I always had the dividends reinvested to purchase more shares. I'm going to sell off the reinvested shares for when we buy a house. My question is, how will I be taxed on this?
Any investment (aside from real estate) held for a year and a day is considered long term and taxed at the long term capital gains tax rate which varies from 0% -15% depending on your Adjusted Income. Anything held for less then one year is taxed at a short term capital gains tax rate which is your ordinary income tax rate.
Each reinvested dividend is considered a "lot" and the cost basis is whatever the stock price was at the time it was reinvested minus any costs. So if you had a dividend that reinvested at $1 10 years ago purchasing one stock and you sell that 1 stock position today for $10, you have a capital gain of $9 of which a long term capital gains tax will be accessed.
ETA: You can choose which lots you want to use for tax reasons. If you have lots with higher cost basis, you can use them to lessen the burden of tax when you file for the year in which they are sold. It may also be possible to have lots that will have a capital loss in which case you won't owe taxes and may use up to $3000 worth of losses against your income tax.
If there is a signifigant amount of money involved, you should consult with a CPA or tax attorney.
Message edited 8/18/2008 10:34:00 PM.
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| Posted 8/18/08 10:31 PM |
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