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Brokerages report the sell value of every transaction to the IRS, not the
profit or loss.
Your first sale was for $5500 (it has benefited from a $500 gain).
Your second sale was for $5000 (it had incurred a $500 loss).
Your brokerage firm reported both transactions.
Actual profit and loss comes from your Capital Gains Schedule. With the
brokerages reporting every sale to the IRS, the IRS can see that you have
filed a P&L entry for each completed transaction. And if you make a short
sale, again the selling price is reported.
Joe
-----Original Message-----
From: michael arnoldi <marnoldi@xxxxxxxxxxxxx>
To: A METASTOCK GROUP <metastock@xxxxxxxxxxxxx>
Date: Saturday, March 11, 2000 09:22 AM
Subject: accounting explanation needed
>if i have an account with say $5000
>i buy $5000 worth of stock & sell the stock with a profit of $500. i
>reinvest the $5500 in another stock, which i sell for a loss of $500.
>the actual account is now back @ $5000.
>here is the question:
>why does the broker report to the IRS that i have $5000+ $5500= $10500.
>( i noticed this last year already & don't quite understand )
>all explanations are welcome
>
>mike
>
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