Capital gains tax?

Question

If i sell shares of stock that I have held for 10+ years for a considerable gain, and use the proceeds from the sale to purchase a home (a capital asset), am i required to pay capital gains tax on the proceeds from the sale of the stock?

Answer 1

1) The Wash sale only applies to losses, not gains. You can't defer gains using the Wash Sale.

2) You may be thinking of a "like-kind" exchange or section 1031 when you sell investment or business property for essentially the same type of property. Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets according to the form 8824.

3) You may not have to pay tax on the gains if you are in the 10% or 15% tax bracket like Sun Tax said, but my guess is anyone with that much stock and thinking of buying a house is probably not in that tax bracket. It is a great suggestion, though. I wouldn't have thought of it.

4) You can rollover the gain to a specialized small business investment company (SSBIC), but you are clearly not doing that.

5) You could die and the people who inherit the stock will get a stepped-up basis thereby deferring the gain permanently, but this isn't a fun way to avoid taxes.

Those are the only ways to sell and not claim the gain that I can think of. It looks like you will have to claim the gain. Good news is the gain for long term stocks is only 15%. Your state may tax your too, but you don't have to pay any FICA taxes on the gain.

I know it is hard to pay taxes and we all try to avoid them as much as possible, but count your blessings. You made large gains and you deferred the taxes all these years. Good luck with your new house.

Answer 2

Yes. There is no exception for reinvesting in another capital asset. Even when a broker sells and buys shares while managing your portfolio you will need to report gains and losses from all transactions. I'm not sure what rule you are thinking of that would confuse you. There is an exception to penalties of early withdrawal from a retirement account if you use it to purchase a first home but you would still pay taxes. The old exclusion of not paying capital gains on a home sale if you reinvest is long gone and replaced with the $250k/500k exemption for primary residence in 2 of the last 5 years but there is nothing for stock sales and home purchases. You will need to file a Schedule D and list the stock in Part II since they are long term. You will pay either 5% or 15% capital gains tax depending on your income bracket.

Answer 3

Yes. But.....if you are (or will be) in the 10% to 15% income tax bracket AND you wait until 2008 you will be able to sell and pay no Cap gain tax. This will be from 2008 through 2010.

Answer 4

Yes. You received economic benefit from the sale. You are lucky though, capital gains tax are either 5% or 15%, depending on your tax bracket. This is better than being taxed at the marginal rate.

Answer 5

No, we ought to incourage investment to create jobs. while Ronald Reagan diminished the fees extra funds got here into the treasury. No economic device has ever been inspired by capacity of extra effective taxes. shrink taxes and extra jobs would be created and much less people will want government counsel. Tax sales circulate up and expenditures down.

Answer 6

The only way to avoid the cap gain is by buying back the same stock within 30 days which is called a wash sale.
If you were selling your main home then bought another home you could defer the gain in a similar matter.
In your case you want to buy an entirely different cap asset.
IF THE STOCK WAS IN AN IRA ACCOUNT then maybe you could avoid an early withdrawl penalty by using the proceeds to buy your home

Answer 7

offcourse u have to pay for it because u gained from the selling of the stockes so the country has to share with u everything

Answer 8

Yes. There is no way around it.