Welcome Guest. Register Now!  



Reply
 
LinkBack Thread Tools Search this Thread Display Modes
  #1 (permalink)  
Old 02-04-2008, 11:06 PM
Junior Member
 
Join Date: Feb 2008
Posts: 3
How to report Loss- Stocks Bought in Dec 2006, sold in Feb 2007..

Hi Folks,

I was preparing my tax return online on HRBlock. But i am confused on 1 thing. I bought stocks of a company in Dec 2006 and sold them in loss in Feb 2007. The 1099B form I received from my broker bank ETrade list all 2007 transactions. It doesnt list stocks of company I bought in Dec 2006 but do list the same stock I sold in big loss in Feb 2007. Is that not consider as loss incurred in 2007. If yes, how do i list that in my returns..

Sorry a dumb question but How to tell IRS in tax return that i incurred this loss.
Please reply

Thanks
Karan



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #2 (permalink)  
Old 02-05-2008, 10:40 AM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,417
Blog Entries: 3
How to report Losses for Stocks Bought in Dec 2006 sold in Feb 2007?

The key issue here is the difference between recognized loss and realized loss. The recognized loss is the loss that was utlimately made when you sold your stock for a loss.

The 1099 Misc from the Brokerage Firm reports the stock transactions that resulted in either a recognized loss or a gain. These are the reported transactions that are reported to the IRS. In other words, these transactions are ones where the stock position has been closed, either you did a short sale and covered your open position or simply sold the stock that you had bought. All of these transactions are considered as reportable transactions.

However, stocks that you bought in 2006 but did not sell in 2007 are considered open positions and are not reportable transactions. Hence, the Brokerage House is not required to report these on the Yearly 1099 Misc Report.

So, your so called unrealized losses are not recognized until you phyiscally sold your position. The IRS will not accept these losses because the taxpayer has maintained an open position.

When in fact, you do sell your position in the near future, at that time you may claim your losses assuming the stock has not rebounded by then.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #3 (permalink)  
Old 02-05-2008, 12:14 PM
Junior Member
 
Join Date: Feb 2008
Posts: 3
You said "However, stocks that you bought in 2006 but did not sell in 2007 are considered open positions and are not reportable transactions. "

What I am saying is that I sold stock in 2007 which i bought in 2006.
Can't I put that in loss for tax filing of 2007?

Quote:
Originally Posted by TaxGuru View Post
The key issue here is the difference between recognized loss and realized loss. The recognized loss is the loss that was utlimately made when you sold your stock for a loss.

The 1099 Misc from the Brokerage Firm reports the stock transactions that resulted in either a recognized loss or a gain. These are the reported transactions that are reported to the IRS. In other words, these transactions are ones where the stock position has been closed, either you did a short sale and covered your open position or simply sold the stock that you had bought. All of these transactions are considered as reportable transactions.

However, stocks that you bought in 2006 but did not sell in 2007 are considered open positions and are not reportable transactions. Hence, the Brokerage House is not required to report these on the Yearly 1099 Misc Report.

So, your so called unrealized losses are not recognized until you phyiscally sold your position. The IRS will not accept these losses because the taxpayer has maintained an open position.

When in fact, you do sell your position in the near future, at that time you may claim your losses assuming the stock has not rebounded by then.



Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
  #4 (permalink)  
Old 02-05-2008, 04:49 PM
TaxGuru's Avatar
Tax Guru
 
Join Date: Jan 2007
Location: New Jersey, USA
Posts: 2,417
Blog Entries: 3
How to report a Loss for Stocks Bought in Dec 2006, sold in Feb 2007?

If you sold the stock then clearly it is a closed position and that makes it a reportable transaction. You must report this stock trade in Schedule D of your Individual Tax Return.

Therefore, you can take the loss on this stock trade when filing your 2007 Tax return.

__________________
Find a CPA near you!

Ask TaxGuru Please refer to the legal disclaimer.


Digg this Post!Add Post to del.icio.usBookmark Post in TechnoratiFurl this Post!Reddit! stumble!bookmark in google!Share on Facebook!
Reply With Quote
Ads
Reply



Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

vB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Follow us on Facebook Follow us on Twitter Google Buzz Rss Feeds

» Categories
 
Individual
 » Income
 » IRA/Sep
 » Medical
 
Corporations
 » Payroll
 
Forum for CPAs
 
Financial Planning
 
 
 

» Recent Tax Q&A
No Threads to Display.