Forum Archive Index - July 2000

["ritchie marr" <ritchie_marr@hotmail.com>]

I have an accountant who tells me everything I need to know....if I ask the 
right questions.

And it is all my fault.

But here is a lesson for anyone who feels like learning from someone else's 
"school of hard knocks class time".

I decided about a year and a half ago, that I would have a go at changing 
from paper to real trades. I had been successfully investing in value stocks 
for about 7 years prior, and felt that I was competent at my "practise" 
trades, and so I began.
At first, I was an ace. Even my broker, who openly disagreed with nearly 
every decision I made, would often comment at my need to be Bottled, or 
touched for good luck. I couldn't do a  thing wrong.

So then I would add in the profit made, and the deals would get bigger.
$10,000 began to feel the same as $1000. $20,000 trades began to be routine 
and anything less than $10000 was becoming ineffectual.

Then I ventured into options, small at first. But small was now $5000.
I lost it all. Traded FEG options for 6 weeks, and managed to turn that $5g 
into $400. I shrugged it off. I then began playing AQLOA and made it back in 
one week.

But I was playing with bigger and bigger slices of my only pie.
Parents, friends, family all wanted a piece of the action, on a loan/ profit 
share basis of course. Hindsight shows up my over-confidence like the car 
headlight shows up the opossumon the road in front of the wheel.
Darn, too late! Now my one pie is three empty pie trays.
Yes I did diversify, etc, but as good stocks matured, I sunk more into AQL 
believing it to be a sure thing, short term easy percentage gain; and in 
another universe another time it probably would have made me a millionaire.

Anyway, getting to the interesting part.....

If you are a registered trader, then losses are tax deductible against 
future gains, or other taxable income.

Or so I understood.

So here I was quietly feeling a little better that the disastrous loses on 
AQL ( in excess of $100,000) could be written off and become tax credits 
against my current and future earnings.

Well, didn't I have a really bad day when my accountant rings up and says 
that my tax bill will be significantly higher this year as a result of all 
the trading profits I had made.


?????????????????????????????( then lots of swear words!!!!!!!!!!!!!)

Due to the fact that I hadn't sold my AQL shares on the 31st of March, none 
of the losses could be realised in this financial year. Absolutely common 
sense to everyone who already knows!

Bottom line : If you are carrying any losses as at the 31st of March of any 
year on any stock you are trading, SELL IT! Even if you want to keep it. Buy 
it back one day later, and you can use the tax losses against any profits 
made. If you have profitable stocks as at the 31st of March and are ready to 
sell DON'T! Sell on the 1st of April, and the profits won't be realised 
until July 7th, the following year. This will give you plenty of time to use 
that profit over and over again to more than cover the cost of the tax by 
that time.

Note also that all manner of things that you are probably buying anyway, are 
also tax deductible.....a portion of your electricity, 50% of your main 
phone, and 100% of any second line. All computer consumables, stationery, a 
percentage of your cars total expenses,if you keep a log book for 3 months. 
And what about that luncheon ( 50% deductible ) to discuss finance with a 
friend who is interested in possibly investing through you at a percentage 
share of course.

And the list goes on and on.

Having said all that, I am still inspired by this quote by someone..."Oh to 
be able to write a $1,000,000.00 tax cheque to the IRD.


Ritchie

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