Reporting interest and????????

[reptile411]

So here is my thing. I have for years now purchased stocks through sharebuilder as well as loaded money into a few different savings accounts. We were talking yesterday about a 70/30 plan in which we would reinvest 70% of all our interest earned and 70% of all stock dividends earned and take in 30%. So now do I claim 30% as income on our taxes sence that's all we took in or do we claim the entire 100% as income even though 70% was reinvested?

[disneysteve]

It is all taxable whether you reinvest it or not. Your 1099s will reflect that.

[reptile411]

Ok thanks so I will be reporting 100% of everything, that kinda sucks. It seams to me if it is reinvested it should not have to be reported hmmm oh well. Thanks again. Now what about this. There are those that are lucky enough to live quite well off of investments. When they purchase shares here or there are those purchases a business expense or no? For example lets say I lived off of said investments and purchased 1000 shares of Google. Can I write off those 1000 shares and then report divedens as income? I mean after all I could not report the income unless I purchased the stock.

[disneysteve]

What you choose to do with your investment income doesn't matter to the IRS. Whether you spend it for rent, food, lottery tickets or more shares of stock, it is still income and is taxed as such.

I don't understand your second question. Why would buying stock be considered a business expense? What business would that constitute?

[reptile411]

Well.... I don't know that's why I am asking. Is being an investor being in the business of investing? if so then would your investment be a business expense? I have no clue. up until now I have just had a good time with this, more of a hobby than anything ells but now I am thinking of capitalizing on my good luck and keeping some of my return. I just want to make sure I do things the right, legal way.

[disneysteve]

Is being an investor being in the business of investing? if so then would your investment be a business expense?

Nope. Creative thinking, though.

Even though you have to pay taxes on gains, you do also get to deduct losses, so at least you get a tax break when things go badly, like they have in recent months.

[reptile411]

I know all about losses. My entire portfolio is down about %30 still. As I said it has always just kinda been a hobby for me so I never claim any losses or anything.

[disneysteve]

I know all about losses. My entire portfolio is down about %30 still. As I said it has always just kinda been a hobby for me so I never claim any losses or anything.

Why would you not claim investment losses? That just compounds your losses.

Remember that you can only claim losses on investments that you have sold, not ones that you still hold that have lost value.

[reptile411]

The only action I have ever taken agents a loss was with Enron. I wanted my worthless stock gone. It showed up in my portfolio as ENE 0.00. My broker said he cant just take it away so we worked out a deal where he purchased it for 0.01 I think I got the better deal with that albeit a total loss of the investment. I guess it would be hard to claim a loss on a sold investment for me as I do NOT generally sell any of them. I buy buy buy and enjoy the dividends. I use to automatically reinvest my dividends but then realized it seemed like they were getting reinvested at very high per share prices. Now they sit in a money market fund and I reinvest them myself when the per share price dips. I think I get a better return this way.

[disneysteve]

I use to automatically reinvest my dividends but then realized it seemed like they were getting reinvested at very high per share prices. Now they sit in a money market fund and I reinvest them myself when the per share price dips. I think I get a better return this way.

They would get reinvested at whatever the share price is at the time. What you are doing is attempting to time the market. You may occasionally luck out with that but over time, it is a loser's game. Of course, with the market in the toilet, everything has been dropping, so the longer you wait, the better price you will probably get, but that situation is an aberration and won't last forever (at least we all hope not).

Something else to consider is your transaction costs. Are you paying more by reinvesting on your own than you were with an automatic plan? If so, that eats into your returns.

[reptile411]

That is correct. my broker has a fee of $9.95. I never thought of this. hmmmm I just got my JPM dividend last month and it was something like .08 a share or something like that. looking at it that way it would take a ton of shares to offset the brokers fee. Very interesting. I am taking full advantage of the market as it is and somewhat loving it. I am making massive purchases for chump change that in a good market I would never be able to do. My hope is that when the market goes back up I will reap the benefits of taking advantage of it now.