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Question: I sold some stock here last year at a loss. (I'm keeping those that are doing well.) Can I get a tax break?

Marc

Answer:

Dear Marc,

Yes. Fortunately, you can deduct investment losses on stocks or mutual funds that you sold in 2002. Here are the basic steps. If you're not into number crunching, then I recommend that you consult a professional tax preparer.

Step 1. Figure the losses on your taxable investments. Your loss is simply the difference between the price you paid for a stock and the sales price. Don't forget to deduct your BUYandHOLD commissions/fees.

Step 2. Next, calculate your capital gains, again taking into account your BUYandHOLD commissions/fees.

Step 3. Then, subtract any losses from any capital gains. You must use your losses to offset any gains before you can deduct your losses.

Step 4. If there is no difference -- for example, you sold one stock for a $3,000 profit and you sold another at a $3,000 loss, you won't get a deduction. On the other hand, you won't owe any taxes on the gain.

Step 5. If you had no gains, or if your losses were greater than your gains, you can deduct up to $3,000 in losses from your ordinary income, including wages and salary.

Step 6. Keep track of any losses over $3,000. You can carry them forward into future tax years.

Step 7. Enter your loss on Line 13 of your 1040. You do not have to itemize in order to deduct investment losses, but you are required to fill out Schedule D.

For More Information: www.irs.gov

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