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Posted by Arthur Kamlet on April 24, 2008, 9:54 pm
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>> 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?
In this, the home of the brave, you can always buy them back, anytime,
anyplace, anywhere. Just understand the Wash sale rules affect your
ability to recognize losses.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
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