Pull One Over on Uncle Sam

Isn’t it fun legally pulling one over on Uncle Sam?   It’s one of life’s greatest pleasures.

But he makes paying taxes so #%$@& complicated that you’re probably missing some very easy (and legal) ways to pay less taxes.  And that means you’re missing out on all the fun!

Let’s visit Financial Zen utopia , where you can invest in fresh fruit.   You own a diversified portfolio of apples, oranges, pineapples, grapes and blueberries.   A veritable nuclear bomb of anti-oxidants.  Good for you!  You’re gonna live forever!

This year the price of oranges went way up.   But the price of apples went way down.

The $100 you invested in oranges is now worth $120 (woohoo!).  The $100 you invested in apples is now worth $80  (whomp whomp).

But it’s all just paper gains and losses until you sell them.

If you sold the oranges, you would have a $20 realized gain and have to pay Uncle Sam a tax of 15% or about $3.

What happens if you sell the apples?   Well then you have a $20 realized loss and Uncle Sam pays YOU $3.  

Gotcha!   Just seeing if you’re paying attention.  It totally doesn’t work that way!  That’d be nice though, wouldn’t it? 

What would actually happen is you can use the $20 loss in apples to offset the $20 gain in oranges.  

Then the net gain for the year is $0 and you wouldn’t owe Uncle Sam anything.  Take that, Unc!

But what if you sell the apples, but don’t sell the oranges?   What can you do with that $20 loss?  

You can use it to offset gains elsewhere – in grapes or blueberries or pineapples – OR if you don’t have any realized gains anywhere then you can use some of it to pay less income taxes.

Even too much fruit isn’t good for you.   That should be a digestible amount for this week.  Next week I’ll show you how to stick to Uncle Sam – Every. Single. Year. – regardless of what your apples are worth.