Hello,

Disclosure: I'm not seeking professional financial advice. All I need
is an understanding for my personal use.

Do stocks work as simple as this... Let's say I buy shares of some
company at $21 a share, and their shares jump up to $31 ... did I make
a $10 profit per-share and I can cash out? ...or am I missing
something?

Also, if I use a trading company such as eTrade to buy/sell stocks, do
they deduct taxes from my earnings or that is my responsibility (end
the end of the year)? And on average, how much taxes does one pay on
profits earned from shares.

Thank you for any insight!

- NYCTrader

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Request for Question Clarification by efn-ga on 23 May 2006 23:24 PDT

You have received a partial answer for free as a comment.  Are you
still interested in paying the full price of this question for a more
complete answer from a researcher?

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Clarification of Question by nyctrader-ga on 24 May 2006 07:15 PDT

Hi efn,

Sure. If you have some time, maybe you can recommend a trading site. I
was looking at eTrade, but they have a dozen different type of
accounts, which is confusing.

Thank you,

- NYCTrader

An official researcher will come in with a better answer, but for free
comments from the peanut gallery:

"Do stocks work as simple as this... Let's say I buy shares of some
company at $21 a share, and their shares jump up to $31 ... did I make
a $10 profit per-share and I can cash out? ...or am I missing
something?"

No, that's basically it.  Also, some stocks--not all--pay dividends to
shareholders periodically, so these stocks generate income for their
holders seperate from the profit (or loss) from when the stock is
sold.

"Also, if I use a trading company such as eTrade to buy/sell stocks, do
they deduct taxes from my earnings or that is my responsibility (end
the end of the year)?"

It's your responsibility to report and pay the required taxes. At the
end of the year, your brokerage company should send you a statement
summarizing your activity so that you (or your accountant) can
complete your tax statement.

"And on average, how much taxes does one pay on profits earned from shares."

Capital gains taxes depend on a few factors including your tax
bracket, how long you've held the stocks sold, and whatever
legislation has been passed. A little websearching should turn up some
online calculators so you can estimate what your taxes would be in any
circumstances.

There are also transaction costs on both purchases and sales.

In the UK there is a tax called 'stamp duty' on purchases

Your brokerage will not deduct taxes.  That is your responsibility
when you file your tax return.  They will provide you a Form 1099 that
lists your taxable income resulting from various sources (i.e.
dividends, interest, capital gains etc.).  You can cash out at any
time, most investments you choose are liquid, however their may be tax
implications.

Income from different sources is taxed differently.

Generally,
Dividends are taxed at a maximum rate of 15% (for the time being)
Long-term capital gains is taxed at a maximum rate of 15% 
Short-term capital gain (holding a stock for under a year) is at your
regular income tax rate)
Interest is also earned at your regular income tax rate.

So, do the math.  Keep in mind, any losses can be used to offset your gains.

Also, there are retirement accounts that hold special tax status you
may wish to use such as traditional and Roth IRAs or 529 plans.

In addition, mutual funds may have a slightly more complicated tax status.

Did you hear the joke that goes:

Did you know that at least four out of five people make money ing the stock Market?

The company that issues the stock.
The stockbroker for the buyer
The stockbroker for the seller
The stock specialist (the auctioneer)

AND THE BUYER?  

 Sometimes even the buyer makes money.

You could revise the joke to add taxes, but then it would be 4 out of 6.

You've gotten a few innacurate answers here re: taxation of dividends, etc. 
Scottrade.com is the best "do it yourself" broker in terms of fees &
reliability. Check out their site. If you join and use me as a
referral we both get free trades. I'll answer your questions as well
is guide you toward some quality investment info if you wish.
www.ThingsFinancial.com

Yes you are absolutely right..
its your profit...
You have to pay short term capital gains depending upon the tax
bracket you fall in.

I think these web based brokers are pretty expensive..
They charge you per trader...
Go for direct access brokers who charge you on per share...
I mean go for per share deal..
If you wanna know how to trade NYSE stocks minimizing losses... then
get in touch with me at girishind  at gmail dot com

cheers
Girish