Tax time Is Here
April 13, 2006
Tax Day is coming, and Satellite Standard Group (SSG) wants to give you a little information that you may find helpful. We interviewed a local CPA who was kind enough to give us a few minutes of time and tell us a few basic items that investors should be aware of.
SSG – Many out there may be new to the stock market and afraid to ask questions. We want to help them out a bit by asking some basic questions that some folks may find helpful. Can you please tell us what a Short Term Capital Gain is?
TCOCPA – Sure. Short Term Capital Gains are tied to a specific time period, and have specific tax implications. Short Term Capital Gains are gains made on sales of an asset that you held for less than one year. These types of gains are considered ordinary income and are taxed at your regular tax rate.
SSG – That sounds simple enough. What is a Long Term Capital Gain?
TCOCPA – A Long Term Capital Gain is a gain on an asset that you held for over one year. These gains are taxed at 15% if you are above the 15% tax bracket and at 5% if you are below the 15% tax bracket.
SSG – So selling something at 11 months and 29 days could have major tax implications. Is that correct?
TCOCPA – Yes. If you could be fairly sure that you can get the same price a couple of days later, you may consider holding onto the asset until it qualifies as a long term capital gain.
SSG – What does my accountant need from me to do my taxes?
TCOCPA – Your accountant will need all of your income information, and in the case of stocks, will need the 1099’s that your broker should send you. A good broker will also include your cost basis in the equity that you sold, but this information is not on the 1099. It is important to know your cost basis.
SSG – What do you mean by cost basis?
TCOCPA – Your cost basis is the price you paid for a stock plus any commissions related to the purchase or sale of the stock. This figure is subtracted from the proceeds of the sale to determine the amount of the capital gain.
SSG – What about options?
TCOCPA – Often times options transactions are not reported by the brokerage to the IRS. It is the responsibility of the taxpayer to track and report options related gains or losses.
SSG – Thank you for taking a few minutes to help out.
TCOCPA - You’re welcome
Satellite Standard Group is not a Financial Advisor. SSG fully recommends that readers contact a Certified Financial Advisor before making any investment or financial decisions. The purpose of this write-up was to provide some very basic information for readers.
4/13/2006 12:23:00 AM
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