Quote:
Originally Posted by The Faba
While this is true, it would be more accurate to say...
"Pay taxes on what profits you make, but not the difference of your total worth."
If you start with $10,000 in stock, then it doubles in value - you've made $10,000. If it then drops to a net worth of $5,000 - you STILL pay tax on the $10,000 you made previously in the year.
Which is bullshit.
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I think the question would be how'd you get to a net worth of 5K? Did you sell the stock you owned at a loss? If so then the loss is tax deductible.
Let's say you buy 100K in XYZ. Over the year it goes up 20%. Do you pay tax on that 20% gain? I believe the answer is yes... if you sell it. If it goes down 20% and you sell it you take it as a loss and write it off. Now if XYZ pays out a dividend during the year you usually have the option to take that as cash and pay gains tax on it or buy more XYZ.