Newspaper article The Florida Times Union

Financial Planners Help Readers with Money Questions

Newspaper article The Florida Times Union

Financial Planners Help Readers with Money Questions

Article excerpt

Each month a group of volunteers from the Jacksonville Society of

the Institute of Certified Financial Planners spends a Saturday

morning at the Times-Union answering calls from readers with

money questions.

Here is a sampling of questions from this month's session

along with answers from the planners (readers' names have been


Q: I have major long-term gains in several stocks right now. I

would like to sell some of them, but am concerned about taking

the gains for this year from a taxation standpoint. Would

"shorting against the box" be a useful strategy and how does that

differ from just shorting a stock?

A: A short sale occurs when you instruct your broker to sell

securities that you do not own. The broker borrows the securities

and delivers them to the offsetting buy position for your

account. You must tell the broker that your intended sale is a

short sale before you start the transaction. Your hope is that

the securities you have shorted will decline in value so, when

you ultimately purchase the securities, they will have gone down

in price so that you are replacing them at a lower cost.

For example, if you sold short Security A when the price was

$30 per share and Security A is now $20 per share, then your

profit is $10 per share. You receive your profit when you

purchase the shares at $20 per share and instruct your broker to

close the short position. You will eventually have to purchase

the security no matter what the price.

If Security A rises above $30 per share, then you are in a

loss position for any amount over $30. The short seller is

responsible for dividends or interest payments occurring while

the position is in place. The transaction occurs in a margin

account, so there may also be interest charges. Gains or losses

are short term and the taxable event occurs when the stocks or

bonds are delivered to the lender to close the transaction, not

when the sale is made.

A "short vs. box" sale is similar in concept, but involves

using the securities that you already own. You may wish to use

this strategy when you are anticipating an imminent decline in

your stocks or bonds but don't want to have the sale taxed in the

current year.

If all the shares you own are "long-term" at the time of the

short vs. box transaction, then when the position is closed, the

sale is treated as long term. There may be additional tax

implications if you own substantially identical securities with

different holding periods.

See an expert before trying these financial strategies.

-- Michael R. Lawrence

Lawrence Financial Services Inc.

Q: Last year, I turned 70 1/2 years old. Am I already late

starting minimum distribution from my Individual Retirement

Account? …

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