CHAPTER 8

Investing

Alert
At the time this book was printed, Congress had not extended numerous breaks for 2012 that had expired at the end of 2011. Check the online supplement in February 2013 at www.jklasser.com or www.barbaraweltman.com to see whether these breaks apply for 2012 returns.

Putting money aside for that proverbial rainy day is an admirable and necessary goal but it can be a difficult proposition, especially in tough economic times when your paycheck doesn't seem to stretch far enough. Still, savings and investing are essential to your financial well-being, and the tax laws can help you to make the most of your efforts. It also provides tax breaks if your investments don't work out.

This chapter explains:

  • Penalty on early withdrawal of savings
  • Loss on bank deposits
  • Capital losses
  • Capital gains and qualified dividends
  • Worthless securities
  • Loss on Section 1244 stock
  • Margin interest and other investment-related borrowing
  • Safe-deposit box rental fee
  • Subscriptions to investment newsletters and online services
  • Home computer used for investments
  • Fees for financial advice
  • Amortization of bond premium
  • Municipal bonds
  • Savings bonds
  • Gain on the sale of small business stock
  • Gain on empowerment zone assets
  • Foreign taxes on investments
  • Exercise of incentive stock options
  • Losses from investment Ponzi schemes

For more information, see IRS Publication 514, Foreign Tax Credit for Individuals; IRS Publication 525, Taxable and Nontaxable Income; IRS Publication 544, Sales and ...

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