D
DeletedUser394
Guest
Excerpt from a book;
On occasion, a hotshot trader makes an investment that generates tons of money, only to find come April 15 that the earnings are classified as income and the expenses are classified as capital losses. With no expenses to deduct, the investor finds that the taxes more than offset the realized profit. This situation is rare, but it happens. Allow me to illustrate. The following table shows the pre-tax profit on this investor's initial investment:
Initial Investment: $1,500
Ending Value: $2,000
Pre-tax profit: $500
The $500 represents the ending value of the investment less the initial investment. The next table shows how the taxes affect the investment's profit, less income taxes due, when the costs are capital and the profits are income:
Profit for tax purposes: $2,000 (1,500 cost disallowed)
Income taxes due at 33% rate: $660
Realized profit: -$160
..............Why in the world is your principle taxed? Is this standard?
On occasion, a hotshot trader makes an investment that generates tons of money, only to find come April 15 that the earnings are classified as income and the expenses are classified as capital losses. With no expenses to deduct, the investor finds that the taxes more than offset the realized profit. This situation is rare, but it happens. Allow me to illustrate. The following table shows the pre-tax profit on this investor's initial investment:
Initial Investment: $1,500
Ending Value: $2,000
Pre-tax profit: $500
The $500 represents the ending value of the investment less the initial investment. The next table shows how the taxes affect the investment's profit, less income taxes due, when the costs are capital and the profits are income:
Profit for tax purposes: $2,000 (1,500 cost disallowed)
Income taxes due at 33% rate: $660
Realized profit: -$160
..............Why in the world is your principle taxed? Is this standard?
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