Posted on 5/26/2009 9:59:52 PM Scott

IRS letter about capital gains
I just got a letter from the IRS that states I owe $232 on a 1099-b that was filed were I sold $1457 worth of stock. I purchased the stocks in 2007 to go to school in early 2008. I sold them and made $17.93 dividends on these stocks. My question is how can they charge me $232 for stocks I paid for with money that I had already paid taxed on when it only made $17.93
You are correct, you should not pay tax on the sale of the stocks. You should only pay tax on the gain from the sale. The gain is calculated by deducting the original cost of the stocks and an commission paid to purchase and to sell it from the sale price of the stocks. The U.S. tax codes imposes 15% federal tax on long term capital gains (i.e. assets that were sold 12 months or more after they were purchased). Short term capital gain (i.e. assets that sold less than 12 months from purchase date) is taxed according to the tax bracket for individuals and ranging from 10% to 35%. Your next step is to send a letter to the IRS showing the capital gain from the sale of the stock and ask them to update their records and issue a revised bill with reduced tax due. Your other option is to file amended return on form 1040X and attach an amended schedule D showing the capital gain from the stock sale.



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