Personal Finance & Money Asked on October 31, 2021
Please help me figure out capital gains.
Let’s say that I bought 10 shares at $100/share with a cost basis of $1,000 and when it went up to $200/share after 3 months, I sold it for $2,000. Now I have a $1,000 short term capital gain.
Now suppose that the stock drops to $150 and I invest $1,500. Does this change the capital gain amount in any way? IOW, will I be taxed on the entire $1,000 or will it only be only $500?
No, you made a gain on your sale of $1000, and that is what you are taxed on.
The new shares you bought later won’t affect your taxes until you sell them.
Caveat: if your sale had been for a loss rather than a gain, then purchasing other shares within 30 days, before or after the sale, could affect your ability to take the loss on your taxes in the current tax year, due to the “wash sale” rules.
will I be taxed on the entire $1,000 or will it only be only $500?
Buying the new shares at $1500 didn't cause you to lose any money. Presumably you still have the other $500 in your bank account, or you spent it on something (neither of which scenarios would allow you to reduce your taxes).
Answered by The Photon on October 31, 2021
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