Random question... how do I treat this on my tax return?
March 2010: Buy 1000 shares of stock ABC
April 2010: Sell 1000 shares of stock ABC for a profit
May 2010: Take all the money I got from selling ABC (original investment + gains) and put it in stock XYZ.
In the following months, I trade the stock about 20 times trying to time fluctuations. Overall I make a profit, but several trades result in losses.
November 2010: I have deposited more money into my E*Trade account and put it all towards buying shares of XYZ.
December 2010: The year ends and I have unrealized gains in XYZ.
So... how are unrealized gains counted? What about the realized gains from stock ABC? I'm guessing they are still realized even though I reinvested the money and it is now uncertain whether I'll ever get it back?
Your gains from ABC are definitely realized. It doesn't matter what you did with the money afterwards. As far as XYZ is concerned, I would imagine the standard is to take the gains from various trades and losses from various trades to find out if you had an overall gain or loss for the year. That could be way off, but it seems to make the most sense. Since you have reinvested money into the purchase of XYZ and currently have unrealized gains on your most recent trade, that shouldn't come into play. And they said my Federal Income Tax class would never pay off...
Appreciate the help, man.
You're going to have wash sale adjustments on XYZ because you didn't wait 30 days before re-entering. (i.e. your cost basis gets carried forward)
Doesn't your brokerage provide you with something to see your realized/unrealized losses for tax purposes?
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