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Forum - Gurus Answer Questions    Gurus answer your questions about the art of trading.

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From: tommcclure (Rep: 0)Date: 11/06/2018 13:39
Forum: Gurus Answer Questions - Msg #649Thread #674046212 (Rec: 0)
Hi all! I Have a question about taxes on trades.

I am going to start trading. Not as much as a day trader, but I plan on being fairly active. Maybe a few trades a week or month.

I know I will pay short term capital gains on any profits. But I am not sure as to a certain situation.

Let's say I buy $1000 of ABC today and next week sell it for a $1500. That is a $500 profit and, if I stop there, when tax time comes I pay $500*.25 in taxes ($125). Simple enough.

But, what if I turn around and invest the entire $1500 in XYZ, and then sell it for $2000?

Do I now pay $500*.25 for each of these $500 profits?

I'm pretty sure that if my XYZ trade ended up losing $500, I could apply it as a loss, and it would be a wash--no taxes to pay on a $500 and a $500 gain.

But, I'm not sure of the two profitable trades, when the second trade uses the profits of the first trade.

Should I, after selling ABC for $500, put $125 aside to pay taxes with? This would mean that I would buy #1375 worth of XYZ.

I have a feeling it is less confusing than I am making it. Any help in seeing the light here would be greatly appreciated.

NOTE: This message was originally posted on 2018-11-06 11:16:31 by the tommcclure.

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