I just received a notice from IRS saying I didn't get my taxes right for 2011. So, my question is, do they tax you on proceeds(how much money you receive when you sell the stocks), or on net profit?
It seems that they want to tax me on proceeds, and this doesn't make sense to me, because this is not really money I made. It seems a little crazy, and I don't want to seek tax lawyers for this stuff.
Thanks a lot
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tax on net profits; What every you sold it for - your cost basis. Example 100 shares bought @10 and then sold @20. cost basis is $1000 sold for $2000 and you get taxed at for the $1000 made. Your effective tax rate depends on the if you held it for over a year or less than a year. less than a year is taxed at you ordinary tax rate and over a year it is taxed at 15%. Hope that helps
Yeah, but suppose you buy 1000 shares at $10 and you sell them back at $9, do you get taxed on $9,000? They apply my income tax rate on the $9,000 received back. Does anyone know how can this be? What kind of mistake is it and how can I fix it?
Seem like an error was made. Did you disclose that the stock was bought at $10 and sold at $9? This loss would entitle you to a tax deduction. Was the stock transferred to you from a parent or relative (stock being purchased at $10 by that person)? If the latter is the case you would have to pay tax on any gifts from a parent over $10k.
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