Optimal Finance Daily - Financial Independence and Money Advice 2849: Tax Basis For Beginners by Sean Mullaney of FI Tax Guy on Double Taxation & Clarifies Taxable Gains
Aug 31, 2024
Sean Mullaney, a tax strategy expert, breaks down the complexities of tax basis for everyday individuals. He explains how tax basis prevents double taxation and clarifies taxable gains. Listeners learn about the significance of depreciation and the benefits of a step-up in basis at death. Mullaney also discusses tax loss harvesting and the different implications for retirement versus taxable accounts, stressing a balanced approach to wealth-building while maintaining accurate records to minimize tax liabilities.
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Mark and Judy's Stock
- Mark buys and sells stock for the same price, resulting in no taxable income.
- Judy buys stock for $20, sells for $100, and has $80 of taxable income.
Basis Prevents Double Taxation
- Basis prevents double taxation by tracking the original cost of an asset.
- It helps determine the actual profit, ensuring only the gain is taxed.
Calculating Basis
- An asset's basis is its cost plus improvements, not just the purchase price.
- For stocks, it includes reinvested distributions and excludes non-dividend distributions.