General Stock Investment Strategies/Paying taxes on stock gains?

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Question
In 2014 I buy stock A for $10,000.00  In 2015 I sell stock A for $20,000.00 a $10,000.00 profit.  I immediately take the entire $20,000.00 and buy stock B.  Do I still have to pay taxes on the $10,000.00 profit if I reinvested it on another stock? This isn't an IRA or stock portfolio retirement fund; I just buy and sell individual stocks that I like.

Answer
Hi John-
Yes you need to report any gain or loss in the year you sell a stock, even if you reinvest the proceeds in another one. With some investments tax laws allow for "like-kind exchanges" that can avoid that outcome, but stocks, bonds, mutual funds, ETFs, etc. aren't eligible for that.

You are able to offset gains with any losses from other sales during the year. So if the value of your $20,000 holding of stock B dropped to $10,000 by December, you could sell it to realize a $10,000 loss. Add the $10k gain from stock A to the $10k loss from stock B and you'd have no taxable capital gain for the year, assuming those were your only sales.

-Tad

General Stock Investment Strategies

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Tad Borek

Expertise

I am a San Francisco-based investment adviser and attorney.

Experience

I opened my investment advisory practice, Borek Financial Management, in 1999, and have been a licensed attorney since 1993.

I received my B.S from Cornell University, and a J.D. from George Washington University Law School.

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