long term capital gain |Form 8949 Capital Gain & Wash Sales calculator software

Capital Gain


Capital Gain

A capital gain is profit that generates when the price of a security held by a holder rises above its purchase price and the security is sold (realized gain). If the security continues to be held, the gain is unrealized. A short-term capital gain is the profit realized on a security held for one year or less. A long-term capital gain is the profit realized on the sale of a security held for more than one year.

How to Calculate Short- and Long-Term Capital Gains

How Capital Gains Tax is Calculated

How TradeMax Can Help Investors Calculate Capital Gains

How to Calculate Short- and Long-Term Capital Gains

The basic rule for calculating capital gains is the sales price minus the cost of selling less the adjusted tax basis (cost basis), which equals the taxable capital gain or loss.

The Taxpayer must classify the gains and losses as either ordinary or capital gains or losses, then calculate net short-term capital gains against short-term capital losses to get a total short-term capital gain or loss.
If the capital losses exceed capital gains, the amount of the excess loss that can be claimed is the lesser of $3,000, ($1,500 if you are married filing separately) or your total net loss as shown on line 16 of the Form 1040 Schedule D, Capital Gains and Losses. If your net capital loss is more than this limit, you can carry the loss forward to later years until they are used up. Use the Capital Loss Carryover Worksheet to figure the amount carried forward. But short-term and long-term capital loss which carried over previous year only deduct the short or long term capital gains in this year seperately.

How Capital Gains Tax is Calculated

In the United States, individuals and corporations pay income tax on the net total of all their capital gains just as they do on other sorts of income. Capital gains are generally taxed at a preferential rate in comparison to ordinary income. The amount an investor is taxed depends on both his or her tax bracket, and the amount of time the investment was held before being sold. Short-term capital gains are taxed at the investor’s ordinary income tax rate, and are defined as investments held for a year or less before being sold. Long-term capital gains, which apply to assets held for more than one year, are taxed at a lower rate than short-term gains. In 2003, this rate was reduced to 15%, and to 5% for individuals in the lowest two income tax brackets. The long-term capital gains are included when figuring out the investor’s tax bracket. However, the 5 or 15% rates do not apply to all long-term capital gains. Long-term capital gains on collectibles, some types of restricted stock, and certain other assets are instead subject to a minimum 28% rate. These reduced tax rates were passed with a sunset provision and are effective through 2010; if they are not extended before that time, they will expire and revert to the rates in effect before 2003, which were generally 20%.

The tax payers also should note that corporate actions such as stock split, stock merge, spin off can cause cost basis changes. That implies that the purchase price is not the cost basis. To track and monitor such actions can help investors understate capital gains leaving them liable for back taxes, interest and other penalties.

The wash sale generated during the buys and sells of a stock also contribute to the cost basis changes. A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

Buy substantially identical stock or securities,

  • Acquire substantially identical stock or securities in a fully taxable trade,
  • Acquire a contract or option to buy substantially identical stock or securities, or
  • Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.

A wash sale will defer losses (possibly increasing capital gains tax due) and increase the cost basis of the new tax lot.

Generally, the proceeds of any stock, bond, or other securities sold during the year will be reported on IRS Form 1099-B by the brokerage or financial institution that carried out the sale.

How TradeMax Can Help Investors Calculate Capital Gains

TradeMax provides tax lot functions to help investors calculate capital gains tax. TradeMax tracks investments and automatically adjusts for wash sales and corporate actions. TradeMax matches tax lots and calculates capital gains and losses. It also characterizes capital gains and losses as short or long-term. This information is then used to produce the Schedule D.

G& L Report


G& L Report – This is the default report created by TradeMax for filing with Taxes.

Now, we will show you how to run a G&L Report:

    Click the item G&L Report in the Account List, you will get the following report preview

    Basic Function
    Short /Long Term Capital Gain /Loss Subtotal The actual Capital Gain amount in the current account. It contains the Short Term Capital Gain Total and Long Term Capital Gain Total.

    Note: With using the Rounding method, the error could be limited within 0.01.

    Total Wash Sales Defer to Next Year

    Display the amount of wash sales deferred to next year

    Realized Gain Total Amount Display realized gain total amount

Wash Sale Detail Report


Wash Sale Detail Report– If you wish to analyze your disallowed wash sale losses that have been deferred to next year, you may run this report. It will show you the baseline position contains open position and Wash sales defer position.

    Click the item Wash Sale Detail Report and you will get the following report preview:

    Basic Function
    Short Term Capital Gain Display all short term baseline position contains open position and Wash sales defer position.
    Long Term Capital Gain Display all long term baseline position contains open position and Wash sales defer position.
    Total Amount The actual Capital Gain amount in the current account. It contains the Short Term Capital Gain Total and Long Term Capital Gain Total.

    Note: With using the Rounding method, it could be error within 0.01.

    Total Wash Sales Defer to Next Year Display the amount of wash sales deferred to next year

Options


Option Dialog box provides the users with possible setting for TradeMax , the users can set different preference for account according to their requirement in General option , filter some unwanted information when running specific reports in Black list option, set your own washsale calculation rule to apply to your own wash sale scenarios in Wash Sale option.

The following wizard will tell you how to make your own settings based on your needs in different options.

  1. Click main button , and a main menu opens:
  2. Click Options button, the following dialog box displays:

Function
Description
General Tab Users can set the basic setting and possible preference after clicking General Tab. This is the default option.
Wash sale Tab Set your own calculation rule for your transactions by clicking Wash Sale Tab.
Black List Tab TradeMax provides you with Black List to filter some information of various reports. With this feature, you can choose to display the information you want by selecting transaction type or Security Ticker to generate the specific report.
Avg Basis Tab TradeMax allow you use Average Basis Method For Mutual Fund Cost Basis Calculating. With this feature, You can figure your gain or loss using an average basis only if you acquired the funds at various times and prices.
Name Enter your name, the name will display in your generated reports
SSN Enter your Social Security Number.
Turn Automatic LiveUpdata on (recommended) You can check the box on the left side to activate Live Update Function, and each time you run TradeMax, the automated Live update dialog box will pop up.
Automatically Scan for Trades You can check the box on the left side to activate Auto Scan function, TradeMax will auto scan your imported transaction.
Exercised / Assigned security ‘s buy/ sell price must be the same as strike price of option You can check the box on the left side to activate the function, TradeMax will auto-match your Exercised/ Assigned securities’ Buy/Sell price with the strike price of option.
Auto Expire unexercised / unassigned options at 0 price on Expiration Date You can check the box on the left side to activate the function, TradeMax will auto expire unexercised/ unassigned options at 0 price on expiration date.
Auto Assigned / Exercised Option to Stock after Split / Reserve Split Event You can check the box on the left side to activate the function, TradeMax will auto assigned / exercised option to stock after split / reserve split event.
Transaction Amount Tolerance Value You can enter a transaction tolerance value to allow transactions to exceed amount within certain tolerances.TradeMax follow the calculation as the formula : Amount = Price * Quantity + Commision , if your abs(Amount – Price * Quantity – Commision)>tolerance value, trademax will give you a warning message.
Long Term Capital Gain Holding Period The default long term capital gain holding period is One year.
Tax Currency The default Tax currency is USD.
Clear Report Cache Every time you run reports in TradeMax, the database will leave report cache which sync the change of the report data . If your report data cache occupies too much space , you can click this button to clear Report Cache. Your report cache will be cleared, but the new report cache will be generated when you run reports once more.
Database Path Click to view your database path.

 

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