Ask Rande 10,000+
- Kirk
- Rande
- Happy
- Rande
- BrianHull
- Happy
- Happy
- Happy
- Rande
- Rande
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» Rande - Re: QQQ/XLK/QQQ swap
In response to message posted by ed_from_chico:ed,
That's a personal choice. We've talked about the pros and cons of each for some time. Stocks in the Nasdaq 100 are selected based on their size. An argument could be made that the 100 largest stocks in the Nasdaq got that way by virtue of their popularity alone and, hence, valuations could be a concern. On the other hand, some might argue that the index represents the biggest and the best. Most would probably agree that QQQ is more of a short-term trading vehicle than a long-term investment choice, however. On the other hand, the stocks in XLK have ostensibly been selected by virtue of objective criteria other than mere capitalization. So, one might say that XLK represents a more thoughtful choice for whatever technology exposure might be appropriate. Another avenue might be an actively-managed technology fund, if you believe the manager's stock picking abilities are enough to overcome the long-term disadvantages of higher costs and taxes. All this presumes continued exposure to technology via a dedicated sector fund is appropriate. There is yet another alternative -- taking the loss and redeploying into somthing like the Total Stock Market index. You would be taking a market weighting to technology (sufficient enough for many, these days) along with all the other sectors out there. There's nothing wrong with putting a little extra into a sector with good long-term promise such as technology, so long as you keep it to a level you can live with (won't materially disrupt your long-term plans and goals during times of adversity) and have the bulk of your portfolio dedicated to a broadly-diversified approach. "Core and explore."
-- posted by Rande
» Happy - Short Sales
Rande, I have a client with short sales that were not closed out by the end of the year. These were not hedging a long position.I am thinking in order to have my return total securities sales (1099B) match the return, I should show the short sales on Schedule D, but list a purchase price which is the same as the sales price. This means no profit, but total sales add up to amount on 1099B.
Is this the best way to handle this?
Thanks for your help.
-- posted by Happy
» Rande - Re: Short Sales
In response to message posted by Happy:
Norm,
Here's the way I've handled open short positions at year-end -- do NOT report the proceeds on Schedule D. Enter "see attached Statement #___" somewhere on the form and attach a reconciliation at the back of the return (or just "see attached" and put it right after Sch. D):
Proceeds per 1099B $XX
Less short positions open at 12/31/XX ($XX)
= Proceeds per Sch D $XX
Doesn't matter if you reverse the order (add open short positions to proceeds per Sch. D to reconclie to 1099B). The important thing is that all is fully disclosed somewhere in the return. That way, if there is a computer-generated notice all you have to do is submit a copy of Sch. D and the reconciliation attachment along with appropriate broker documentation to "respectfully request" correction to the notice of tax deficiency and abatement of penalties, if any, the IRS mistakenly thinks it's due.
BTW -- In the subsequent year when the short position is closed you just report proceeds and cost basis as normal even though the dates are, of course, opposite of the normal chronological order. And, at that point, I wouldn't bother with a reconcilliation statement -- the IRS usually doesn't send a notice when you report more proceeds than the 1099B shows. 
For someone who continually has open short positions at year-end, though, a reconcilliation becomes a little more involved when you have current and prior-year positions being opened and closed on an ongoing basis. What you really need to do is talk to your client about the beneifts of buy-and-hold.
-- posted by Rande
» BrianHull - Re: Re: TEFQX
In response to message posted by Rande:Rande thanks for your reply. I am a fairly new investor. I bought TEFQX on Bob Brinkers recomendation. I have it in an IRA so I can not take a tax loss. I hate taking the loss and I am thinking that if the market ever becomes positive that this type of fund will move up much faster than the Total Market. I can purchase the same amount shares for such a lower price my cost basis improves dramatically. What do you think of this fund going forward?Thanks.
-- posted by BrianHull
» Happy - Re: Re: Short Sales
In response to message posted by Rande:Thank you very much. I will do as you suggested.
This is my Blue Collar Civil Servant/Stock Speculator. In 1999 as you recall she had profitable trades of about 1,000,000 and unprofitable trades of about 250,000. For a net gain of 750,000 . There were about 200 trades involved.
Well as you might expect 2000 was a bit more difficult. 1,200,000 in gains, but about 1,290,000 in losses. For a net loss of 90,000. There was about 10,000,000 in total trading volume. I never know the full story because I only know about things that were sold, not what is being carried in the portfolio. Thanks again for the tax help.
-- posted by Happy
-- posted by Happy
-- posted by Happy
» Rande - Re: Re: Re: Short Sales
In response to message posted by Happy:Norm,
Sounds like she's making some broker somewhere very happy. BTW, here's the reconciliation I'd use for staggered multiple-year opens/closes:
Proceeds per 1099B
Plus short positions open at prior year-end closed in current year
Less short-positions open at current year-end
= Proceeds per Sch D
BTW -- I know I don't need to tell you this, but by way of general information...short sales are almost always reported as short-term no matter how long the short position remains open. There are rare exceptions, though I've never seen one in practice.
-- posted by Rande
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