What happens tax wise when you sell stock?

[nodmicks]

I'm curious what happens tax wise when you sell stocks. It was set up so the dividends keep reinvesting. Since our FFEF is tanked and the EF is about tanked dh and I were thinking of sell stock to pay off the last medical bill and to bring the emergency funds back to life. However I don't want to go into this blindly and mess things up.

[Russ]

How was it invested in the first place? Through a 401K, pension fund or....?

[Greebo]

Assuming the stock is held in a standard account with no special tax implications, it works like this:

1) Stocks sold that you've owned for more than one year are taxed at the capital gains rate.
2) Stocks sold that you've owned for exactly 12 months or less are taxed as normal income.

The amount that is taxable is the gain. The dividends used to purchase the stocks are also taxable but those are handled in your 1099-DIV forms. You calculate the gain by determining the cost basis of the shares at the time of purchase (which means if you have 1,000 shares bought at different intervals you have to calculate the start price for EACH CLUSTER of shares) and deduct that cost basis from the sales price, to determine your taxable gain.

So if 100 shares were bought at 10 and 200 at 20, and 500 at 30, and you sold at 40, then you're taxable on (100*(40-10)) + (200*(40-20)) + (500*(40-30)) , and depending on when they were bought, some of those would be at 15% and some at your normal income tax rate (higher).

[Russ]

Curiosity question - How long would it take to rebuild your EF's if you did not cash in the stock?

[nodmicks]

Assuming the stock is held in a standard account with no special tax implications, it works like this:

1) Stocks sold that you've owned for more than one year are taxed at the capital gains rate.
2) Stocks sold that you've owned for exactly 12 months or less are taxed as normal income.

The amount that is taxable is the gain. The dividends used to purchase the stocks are also taxable but those are handled in your 1099-DIV forms. You calculate the gain by determining the cost basis of the shares at the time of purchase (which means if you have 1,000 shares bought at different intervals you have to calculate the start price for EACH CLUSTER of shares) and deduct that cost basis from the sales price, to determine your taxable gain.

So if 100 shares were bought at 10 and 200 at 20, and 500 at 30, and you sold at 40, then you're taxable on (100*(40-10)) + (200*(40-20)) + (500*(40-30)) , and depending on when they were bought, some of those would be at 15% and some at your normal income tax rate (higher).

I will read this again slowly! It has been purchased every quarter for several years. That is a lot of different dates but most over a year. Am I reading correctly that the info would come on the tax form?
I think I need to call the pro to tell me exactly what I would be facing. As in an approximate number. From my estimates we should almost break even on taxes this year and owe about $50.

Curiosity question - How long would it take to rebuild your EF's if you did not cash in the stock?

Just the baby EF maybe 2 weeks once I pay what is left of the medical bill off. So tops a month for medical bill and EF. To rebuild the FFEF (which is my big concern) to 9 months + again I'm guessing around 2 years baring huge things happening like the foundation structural damage and huge medical bills we have had.
The stock would give it a good start.

How was it invested in the first place? Through a 401K, pension fund or....?

It is not in a 401 , retirement or pension plan. Just plain old ups stock. They have a plan where employees can buy at a slightly reduced price and one can have a set amount taken out per pay period to purchase some every quarter. That is how dh bought it.

[Greebo]

I will read this again slowly! It has been purchased every quarter for several years. That is a lot of different dates but most over a year. Am I reading correctly that the info would come on the tax form?

Ha. If you're lucky. I learned the hard way that I had to go back over several years of stock history and make a best guess. If you didn't keep your statements when your reinvestments occurred, you've got some leg work to do.

I think selling your stock to replenish the FFEF makes good sense. If you reversed the situation you would not USE your FFEF to buy the stock, after all.

[nodmicks]

Good thing I keep papers in my bursting files!!!!!!! I still think I would need our guy Rob to help me as I swear this reads like Greek to me.

You make a very valid point about using to restart funding the ffef. Besides it would make me feel 900% better.

[Ramona]

Can I assume you receive quarterly statements from the account manager?

If so, there should be a contact number on it. I'd call and ask IF you decide to sell, do they send you a Tax Reporting Statement including capital gains/losses and cost basis information. If they do, it should arrive at the end of January for the previous tax year. It will be a big help in preparing your taxes.

The 1099-DIV is something else they'll send but I assume you already know this.

[nodmicks]

Yes Ramona and we never even open them. However I have seen the account online. Nope I really know nothing about it as we have never ever sold a stock

Thanks everyone!