You have $90,00 to invest in the market. You earned that money from regular employment and have already paid regular income tax on it in previous years.
You bought 1000 shares of company ABC at $90 pps. Price goes to $100, you sell making $10,000 profit (on which you owe usual cap gain tax).
From sale of ABC stock you have $100K which you use to buy 1000 shares in company XYZ at whatever current price is. Point is you reinvest the entire $100,000 your received from sale of ABC (your $90K "seed money" and your $10K profit).
Tax liability - YES on the 10K cap gain from sale of ABC, but do you owe ANY KIND of tax on the additional $90K your received from sale of ABC? Remember, that is the original money you earned from a regular paycheck in previous years and that you invested in ABC in the first place.
If you earned $90K from job and paid taxes on it and then open investment account at Honest John's Stock Broker firm and deposit all $90K to open that account - the IRS can not tax you again when you deposit your money into the investment account? Right?
Probably not explaining it most clearly but my neighbor insists the initial deposit into a stock broker account counts as another taxable tranasction? Just as if I had earned AN ADDITIONAL $90K from my job. I told him he's crazy - the whole NYSE would grind to a holt if everyone's "seed money" was taxed again at time of initial deposit. Nobody would ever buy or sell anything if you were getting taxed again, and again, and again, etc.
Captain gains tax I understand and can live with. But just putting money, from whatever source, into an investment account that you open can not be liable to tax, right? As long as I can account for earning, and paying tax on, that money in previous years, right? I assume there is some kind of statue of limitation on money earned years ago that has been resting in some savings instrument ever since, right?
Please tell me I do not owe my neighbor a case of beer. He'll never let me forget it.
You bought 1000 shares of company ABC at $90 pps. Price goes to $100, you sell making $10,000 profit (on which you owe usual cap gain tax).
From sale of ABC stock you have $100K which you use to buy 1000 shares in company XYZ at whatever current price is. Point is you reinvest the entire $100,000 your received from sale of ABC (your $90K "seed money" and your $10K profit).
Tax liability - YES on the 10K cap gain from sale of ABC, but do you owe ANY KIND of tax on the additional $90K your received from sale of ABC? Remember, that is the original money you earned from a regular paycheck in previous years and that you invested in ABC in the first place.
If you earned $90K from job and paid taxes on it and then open investment account at Honest John's Stock Broker firm and deposit all $90K to open that account - the IRS can not tax you again when you deposit your money into the investment account? Right?
Probably not explaining it most clearly but my neighbor insists the initial deposit into a stock broker account counts as another taxable tranasction? Just as if I had earned AN ADDITIONAL $90K from my job. I told him he's crazy - the whole NYSE would grind to a holt if everyone's "seed money" was taxed again at time of initial deposit. Nobody would ever buy or sell anything if you were getting taxed again, and again, and again, etc.
Captain gains tax I understand and can live with. But just putting money, from whatever source, into an investment account that you open can not be liable to tax, right? As long as I can account for earning, and paying tax on, that money in previous years, right? I assume there is some kind of statue of limitation on money earned years ago that has been resting in some savings instrument ever since, right?
Please tell me I do not owe my neighbor a case of beer. He'll never let me forget it.
