Should I include the capital gain amount of liquidated stock in my income to determine the capital gain rate on that stock?

by Judith Herron, CPA | Aug 29, 2018

For 2018, If I liquidate a stock held for five years that is worth $500,000 (basis of $50,000), must I include the amount of the capital gain in my income for purposes of determining my capital gain rate? For example, married filing jointly income this year will be $50,000, putting me in the 0 percent capital gain bracket. Will I owe 0 percent, or will I have to add $450,000 to $50,000 to determine the capital gain rate?

Your adjusted gross income for the year includes all income you recognize in that year, so the gain will move you to the highest rate. There are some things you can do to try to offset the ensuring tax burden. The IRS will let you net any long-term capital losses you have in the year against the gains. So, if you have some losers in your portfolio, this would be a good time to sell. In addition, if the stock you owned paid dividends that you reinvested, that amount can be added to your basis to reduce the gain.

For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.

Answered by: Judith Herron, CPA, is with Markovitz Dugan & Associates in Pittsburgh, Pa.

The responses are based on the limited information provided by the questioner and apply the laws and regulations at the time of posting. Other options could arise as rules and regulations may change over time, including but not limited to the passage of the Tax Cuts and Jobs Act of 2017. They are intended to provide general information, not specific accounting or tax advice; they are not intended or written to be used and cannot be used for the purpose of avoiding or evading taxes or penalties under the IRS code or regulations. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members.
Financial FAQs

Search the most frequently asked finance and accounting questions and read the responses from PICPA members. Always consult a CPA before taking action.