Today TaxMama hears from Roland in Oxnard, CA, who tells us “I have some Bear Stearns stock. With the recent collapse of the stock, I’m in the negative by almost $2,000.00. Would it be better to sell my Bear Stearns stock now at a loss, or wait until JPMorgan completes the stock swap? Would the loss be the same, tax wise?”
Dear Roland,
That’s certainly been a disastrously managed firm.
I can tell you about the tax implications of selling now or later.
But my crystal ball simply isn’t working on the investment side, today.
If you sell your Bear Stearns stock right now, ending up with a $2,000 capital loss, you’ll be able to deduct the whole loss. After all, you’re entitled to deduct up to $3,000 worth of capital losses in excess of your gains.
What about when JP Morgan’s stock swap takes effect?
According to the upcoming June issue of the Tax Hotline, this swap doesn’t fall within the definition of a tax-free rollover. So, you will be able to recognize your loss when the exchange is completed.
In other words, you’ll get the JP Morgan stock AND a deductible loss for the difference.
So the decision about whether you want cash or JP Morgan needs to up to you.
Keep reading the Tax Hotline for further details about how this transaction is to be handled.
Shhh…don’t tell anyone. The Tax Hotline has been my secret resource practically since the beginning of my own tax practice. It kept me up to date, without my having to race down to the Santa Ana Law Library or to buy the $3,000 + full tax service subscriptions. That’s one of the reasons I am especially jazzed about being included in their June issue, talking about Tax Traps and Opportunities for Unmarried Couples.
And remember, you can find answers to all kinds of questions about Bear Stearns and other tax issues, free. Where? Where else? At TaxMama.com
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