How Secure Are Your Security Transactions?
BY VIRGIL V. PEDERSEN Partner, San Diego Office
Presented before technical conferences of the San Diego Chamber of Commerce — November 1960, and El Centro Chamber of Commerce — December 1960
IT IS ENTIRELY possible that every person in this room either now owns securities or expects to hold securities sometime in the future.
It is also possible that each of you will have not one, but many security transactions each year and each and every one of these transactions will have some effect on your taxable income for the year.
Most of these transactions are fairly simple. We buy the security, we hold it for a period of time, and we sell the security. We have either a gain or a loss and it is either short-term or long-term, depending on the period the security was held. However, time after time we have seen taxpayers who have gone ahead and completed a particular transaction
with the result that they pay hundreds or even thousands of dollars of tax, which need not have been paid.
Fortunately, most of our clients will consult with us prior to the completion of a transaction, if any doubt exists in the client's mind. Therefore, in my remarks today, I. would like to outline a few of the basic rules and thereby make you aware of some of the areas that could later prove troublesome.
No football coach in his right mind would send a football team on the field unless his team was well versed in the rules of the game. I am sure you will agree this common-sense approach applies equally well to your entrance into the field of security transactions.
I won't attempt to discuss some of the more sophisticated problems,
each of which could be a study in itself. If you face such a problem, we have many competent attorneys and CPAs who can assist you in understanding the difficult language of the Internal Revenue Code, and in marshaling the necessary facts and figures that you must have before any intelligent tax planning can be accomplished.
CAPITAL GAINS AND LOSSES
DEALER VS. TRADER
Occasionally, some of our clients become concerned that they may be classed as a "dealer" rather than as a "trader" or an "investor." These questions are usually raised by taxpayers who have numerous