Let's say hypothetically that I have turned $50,ooo profit during the first 11.5 months of 2012. Then during the last week or two of DEC, I invest all of it back into the market where it will remain until sometime in 2013. What percentage would I be income taxed if my re-ienvestment was put into actual shares? How about if my entire re-investment was put into options contracts, is there a difference? I am currently studying tax law, but was interested in what ever it is others here would like to share about the topic.
your taxes would be on the 50k profit. once you have booked a profit there is no way to unbook it unless you take a realized loss that could be used to offset the profit.
you could put some amount into an IRA and invest that, this woud insulate a small portion from taxes.
study harder i am still laughing do you know how many people would never pay tax if you could do that haha
That makes sense. But what if I never sold any stock for a profit. And instead my holdings had gained 50k in value? In other words, I buy 50k in XYZ at the beginning of 2012, and at the end of the year my stock is valued at 100k. Am I to pay an income tax in this situation?
no. not unless you book the profit. the exception would be if you declare mark to market trader status.
no, it's not capital gain however if the stocks pay dividends you would be responsible for paying taxes on the amount you received. I know of know way to avoid taxes on a profit. OP could have held a few more weeks and reduce taxes by converting short term cap gain to long term cap gain which is taxed at a reduced rate. Depends on his outlook for next year, he may prefer to pay the tax in one year or the other depending on what else he has going on. Warren Buffet makes bilions on a stock, but never pays any tax becasue he never sells.