Do you have to pay tax on stock holdings if you don't sell?

Question

If you're holding shares of a particular stock, but you don't sell, do you pay capital gains (or any other) taxes? Or do you only pay after you've sold? Also, what about a stock of a company that went bankrupt and liquidated, yet you can still see the shares in your portfolio (doubt I could sell them?)?

Thanks.

Answer 1

If you receive any dividends, they are taxable. Ordinary dividends are taxed as ordinary income and qualified dividends are taxed as long-term capital gains.

For stocks that are declared worthless, you may claim a capital loss in the year that they are declared worthless. List the stock on Schedule D with a sales price of $0 and write "Worthless" next to the entry.

Answer 2

For stock that you own, you do not pay tax on the value of the stock. You only are subject to tax when you sell the stock. However, in the past, Florida (which does not have an income tax) used to assess a property tax on a person's stock portfolio, although that tax was repealed in 2006.

Answer 3

To answer your question, no you only pay tax on capital gains tax in the year that you sell the shares. You control when the tax bill comes due.
Worthless stock is a capital loss in the year that the stock becomes worthless. Your broker should be able to tell you if a stock is worthless. If it occurred this year report it this year. If it happened in a prior year you will need to file an amended return for that year. You can file an amended return for up to seven years for a loss on a worthless stock loss.

Answer 4

If you are holding the stock in an ordinary account (i.e., not a retirement account, like an IRA or 401(k)), you have to pay taxes on dividends paid to you during the year. Usually, this will reduce your refund the following April, or perhaps you will have to send the IRS a check, instead.

Answer 5

Answers given above are correct for Federal and state income tax. Depending on your state of residence and the amount of your holdings, you may have an intangible tax. An intangible tax is separate from income tax. The tax is applied to intangible assets held and is based on the state of residence. If you're unsure I would call your State Department of Revenue.