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Posted by PeterL on April 24, 2008, 8:49 pm
Please log in for more thread options > I bought and sold some stock in 2008 on which I made about $11,000 in
> short term capital gains. I also have some stocks that are not doing
> as well - if I sold them today I would have about a $3,000 short term
> capital loss.
>
> My question is this: should I sell those losing stocks now and buy
> them back?
>
> I think they are going rise again, so my intention was to hang onto
> them for a longer term. But it occurs to me that if I sell them now,
> I would have $3,000 in losses to help offset some of my $11,000 gain.
> And if I then turned around and used the proceeds from the sale to re-
> buy the same stocks (let's say I could get them at the same price),
> the only thing that would have changed would be the basis date for the
> stocks (for determining when they went from short-term to long-term),
> the basis value, and the fact that I can offset $3,000 of my gains.
> And, of course, there's the $20 in transaction fees, but let's just
> ignore this for the sake of this question. But everything else would
> be equal.
>
> So is there any reason why I shouldn't lock in this $3,000 loss now?
> I realize that because the basis value of the stocks would be lower,
> then when I sell them in the future (if they do rise) I will end up
> with that $3,000 back as gains then - but I'm thinking that will be a
> long-term gain, taxable at a lower rate, and the $3,000 loss this year
> will offset my short-term gains at the higher rate. I'm thinking this
> would trade $3,000 of my short-term gains for $3,000 of later long-
> term gains.
>
> Does this make sense?
>
> ========================================= MODERATOR'S COMMENT:
> The Wash Sale rule says if you sell at a loss, and within +/- 30
> days buy substantially identical securities, you have a Wash Sale. The
> loss on a wash sale is disallowed, and the dissallowed loss is added to
> the basis of the replacement shares. So your scheme does not work at all
> unless you are willing to wait more than 30 days.
>
And if the stocks rise during the one month period when you cannot buy
them back due to wash sale rules?
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