Tax questions

[Moliere]

I am trying to anticipate my taxes for next year. Specifically, I want to understand how to calculate capital gains. This would be for short-term stock holdings.

Questions:
1) All gains would be taxed as regular income?
2) How do you calculate the gain of a stock that is bought and sold multiple times? Example:

I buy 10 shares of XYZ at $100, then sell it 2 weeks later for $150. The XYZ stock goes down a few weeks later so I take the entire $150 and buy 20 shares. A few weeks later the price goes up and I sell everything for $200. Repeat a couple more times as the stock goes up and down. At the end of the year I have bought and sold the same stock lets say 5 or 6 times. Am I being charged a capital gain on each sale even if I reinvest all the money on another purchase?

3) Depending on the answer to #2, is it better to have all of this increased cash reinvested in a stock purchase before the end of the year or it doesn't matter since I will be taxed on the gain regardless of what I do with the money afterwards?

[stessier]

I am trying to anticipate my taxes for next year. Specifically, I want to understand how to calculate capital gains. This would be for short-term stock holdings.

Questions:
1) All gains would be taxed as regular income?
2) How do you calculate the gain of a stock that is bought and sold multiple times? Example:

I buy 10 shares of XYZ at $100, then sell it 2 weeks later for $150. The XYZ stock goes down a few weeks later so I take the entire $150 and buy 20 shares. A few weeks later the price goes up and I sell everything for $200. Repeat a couple more times as the stock goes up and down. At the end of the year I have bought and sold the same stock lets say 5 or 6 times. Am I being charged a capital gain on each sale even if I reinvest all the money on another purchase?

3) Depending on the answer to #2, is it better to have all of this increased cash reinvested in a stock purchase before the end of the year or it doesn't matter since I will be taxed on the gain regardless of what I do with the money afterwards?

My understanding is Yes, taxed at each step, and it doesn't matter because you are taxed at each step.

[Scuzz]

I am no expert on this but the answer to your final question is (I think) that it doesn't matter where that cash is at the end of the year. It is the gain/loss that matters.

For tax purposes it is the gain/loss on each transaction. They would end up on the short term portion of a schedule D and as short term they would be treated as regular income. Long term holdings are treated slightly differently.

Again....I am no expert on this and let my accountant do my tax return. I do know many people will sell at the end of the year if a loss is involved or wait until after the end of the year if a gain is involved. Delaying the taxable income. But it all depends on what the rest of your income would look like.

[Scuzz]

And since this is a tax thread I will mention that if you have property taxes due and already assessed you may want to consider paying them by the end of the year because they may not be deductable for you next year.

[Isgrimnur]

And since this is a tax thread I will mention that if you have property taxes due and already assessed you may want to consider paying them by the end of the year because they may not be deductable for you next year.

USA Today

The IRS has a warning for the thousands of homeowners in high-tax states who have been rushing to prepay their 2018 property taxes before the new federal tax law takes effect: You may be out of luck.
...
In an advisory posted on the tax agency's website, the IRS said prepayments of 2018 state and local taxes before Jan. 1 may be tax deductible, but only if the municipalities have actually assessed the taxes before the year ends.
...
"Estimating your property tax liability isn’t enough. The property tax must be billed, too," Nicole Kaeding, an economist with the Center for State Tax Policy at the Tax Foundation, wrote in a Wednesday blog post.

[Scuzz]

And since this is a tax thread I will mention that if you have property taxes due and already assessed you may want to consider paying them by the end of the year because they may not be deductable for you next year.

USA Today

The IRS has a warning for the thousands of homeowners in high-tax states who have been rushing to prepay their 2018 property taxes before the new federal tax law takes effect: You may be out of luck.
...
In an advisory posted on the tax agency's website, the IRS said prepayments of 2018 state and local taxes before Jan. 1 may be tax deductible, but only if the municipalities have actually assessed the taxes before the year ends.
...
"Estimating your property tax liability isn’t enough. The property tax must be billed, too," Nicole Kaeding, an economist with the Center for State Tax Policy at the Tax Foundation, wrote in a Wednesday blog post.

Exactly, you can only deduct for property taxes you have already been assessed. For those in California for example that comes in two payments, one due already and one due in March of 2018. You can pay the March payment in 2017 for the deduction because it has already been assessed. But you cannot pre-pay the fall 2018 payment as it has not been assessed yet.

[RunningMn9]

For the stock transaction, if they are all short term (first buy was in 2017), then you have to pay taxes on each sale. If each sale included all of your shares than you have to have a line for each sale (which includes the buy information as the cost basis - make sure transaction fees are included in cost basis). I *think* that they simplified the reporting rules for short-term transactions after the 2008 meltdown, and that your brokerage will send you a 1099 (I think it’s a 1099, but it’s something), that includes the details you need.


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[Moliere]

What if the stock is actually a cryptocurrency? I know that the IRS considers them like any other stock and that works if I am using USD to buy and sell them. But what if I use USD to buy Ripple, then convert that Ripple to Bitcoin, then convert that Bitcoin to Doge? How am I supposed to calculate the loss/gain on those transactions? It would be like using AT&T stock to buy Verizon stock.

[Isgrimnur]

Notice 2014-21

For federal tax purposes, virtual currency is treated as property. General tax principles applicable to property transactions apply to transactions using virtual currency.
...
Under currently applicable law, virtual currency is not treated as currency that could generate foreign currency gain or loss for U.S. federal tax purposes.

[Moliere]

So it looks like I would have to figure out the USD value for each of those currencies at the time I did the conversion from Ripple to Bitcoin to Doge. What a pain. Thanks Obama!

[Smoove_B]

How am I supposed to calculate the loss/gain on those transactions?

Hire an accountant that specializes in l33t transactions.

[pr0ner]

How am I supposed to calculate the loss/gain on those transactions?

Hire an accountant that specializes in l33t transactions.

[Zarathud]

Paying your assessed but not due taxes will work in much of Illinois, Indiana and Ohio. The IRS just confirmed this works, and made clear it does not work if taxes are not yet assessed or billed. So the key is to get a bill from the state or county. Cook County made it easy.

Each time you sell, you close out a transaction and recognize gain or loss. The Trump tax bill discontinued Section 1031 treatment except for real estate -- a process by which you can treat buying and reinvesting in the same type of property as an upgrade rather than a sale. There is no consensus that 1031 exchanges worked for cryptocurrencies, but it is clear they are stopped for 2018.

The Trump tax bill almost forced you to always sell your oldest stock in FIFO (first in, first out) rules, rather than the one you chose, but they backed off after the stock brokers went crazy.

[Grifman]

I have a couple of questions related to care for the elderly:

1) I have a cousin with Alzheimer's disease living in a retirement/nursing home. He is incapable of bathing and toileting and probably dressing. Is this expense tax deductible?

2) My father before he passed away this year required in home care. He could not bathe, dress himself, toilet himself, and required around the clock care for about 2 months. Is this expense tax deductible?

As I read some tax publications, it appears that they are but I'm just not sure. Can anyone provide any guidance? Thanks.

[Zarathud]

The deduction is allowed in 2017 by Internal Revenue Code Section 213 which references the definition of qualified long-term care services in Internal Revenue Code Section 7702B(c) -- the care required for a chronically ill individual pursuant to a plan of care provided by a licensed health care practitioner. Chronic illness is determined by (a) a need for supervision for safety due to cognitive impairment, (b) the inability to perform at least 2 daily activities for at least 90 days due to loss of functional capacity, or a similar disability under HHS regulations.

So yes for #1 and likely for #2. The 90 day period is not a waiting period but a definition of severity--if dad had lived more than 90 days, would care have been required? For Alzheimer's, that's an easy answer.

[Grifman]

Yes, my dad had a terminal illness and wasn't getting any better. He would have needed it as long as he lived. Thanks for the info. Much appreciated.

[Grifman]

Do I need some sort of certification from a doctor? I read this:

A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as: 1) Being unable for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual, due to the loss of functional capacity. (activities of daily living are eating, toileting, transferring, bathing, dressing, and continence) or 2) Requiring substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.

if so, then what sort of forum does this certification take? That they meet the above qualifications? Will a letter from the doctor suffice? Again, thanks.

[Zarathud]

Ask for the medical records and check with the doctor if it is unclear. The admission to hospice care and referral for in home care may be sufficient. If cousin's info says he has Alzheimer's requiring care, then that's pretty easy.

The quality of the documentation is an issue that would come up on any audit -- many tax preparers will fill it in based on your verbal information (for better or worse).

[Grifman]

Ask for the medical records and check with the doctor if it is unclear. The admission to hospice care and referral for in home care may be sufficient. If cousin's info says he has Alzheimer's requiring care, then that's pretty easy.

The quality of the documentation is an issue that would come up on any audit -- many tax preparers will fill it in based on your verbal information (for better or worse).

Again, thanks you very much.