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stablecable
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Taxes  Reply with quote  

Hi

I didn't work all of 2010. I sold about $2500 worth of stock. That's all the income I have for the year.
I have a job now and plan on working all of 2011.
I own a home and usually deduct mortgage interest but not much else.
Will I have to file a tax return for 2010?
I want to sell more stock.
Should I sell it now or wait till next year?


Thanks.
Post Mon Dec 20, 2010 9:32 am
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coaster
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It's not how much stock you sold, it's what you made or lost on the sale:

Cost of stock - sales price = capital gain/loss.

If the stock was held for more than a year, the gain/loss isn't considered ordinary income; it's taxed at a different rate.

However, if what you're telling us is that you made (had a capital gain) of $2500, then your personal exemption/standard deduction more than covers that regardless of whether it's long-term or short-term. Your net tax is zero and if you owe no tax, then you're not required to file a return.

Now for your decision whether or not to sell before the end of the year:

1) if it's a gain, then will the gain, combined with the previous gain, bump your taxable income up over zero? (The standard deduction is $5700 and up, depending on circumstances) Consider selling next year.

2) If it's a loss, then your tax is already zero, you have no further advantage selling now. Sell next year.

3) somewhere in between #1 and #2, then consider selling now.

So, as far as a tax decision, it comes down to whether or not the contemplated sale will cause you to owe tax for 2010. That depends not only on the amount; not only on the standard deduction, but if you have itemized deductions that exceed the standard deduction, then on how much all of those are.

To make it more complicated, if you decide to wait, then of course you have to also factor in whether you wish to expose this stock to the possibility of price change.
Post Mon Dec 20, 2010 4:23 pm
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