Replies to post #77 on A.I.M. Users Bulletin Board (AIMUSERS)

[TAB]

Hi XT, you are right in that AIM has no influence on what the US tax code considers short term or long term gains.

Because I am expecting to stay with this for many years, and I know the LT gains are taxed at 20% versus ST gains being taxed in the 30%+ area, I want to use the method that gives me the most LT gains I can get over the life of the AIM account.

This all gets dealt with on Schedule D on the tax return, and Uncle Sam will not complain if you simply report everything as ST gains -- but you may pay more tax than is necessary.

tab

[OldAIMGuy]

Hi XT and TAB, AIM really doesn't give a hoot about which way we report our capital gains. However, from a pure cash flow point of view, we should care!

Those who are used to short term trading strategies are used to paying full boat on taxes. However, as a long term AIM user, I'm used to paying only at the 20% rate - well under what personal income gets taxed.

Uncle Sam really wants us to be consistent in whatever we do. So, years ago I started documenting all my sales on a FIFO basis. Gain or loss, that's the way they get reported. This has kept the vast majority of my transactions in the Long Term category (more than 85% and closer to 90% of sales in most years).

There's not much we can control in the world of investing. However, those few things that we can control we should. "Control the Control-ables!" We can control the cost of commissions as a percentage of each transaction. We can control our tax rate to a certain extent once we've rounded the first 12 months of ownership. We can't control where the market price is going to go on a security. So, I highly recommend that everyone do whatever they can to incur Long Term gains over Short Term. FIFO accounting tends to do this automatically.

Best regards, Tom