Personal taxes: offsetting capital gains with losses

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Personal taxes: offsetting capital gains with losses

Postby rjbraun » Sat Dec 29, 2012 2:06 pm

Example 1: Let's say I have a $10,000 loss carry forward from 2008. If I sell mutual funds and / or stocks that result in a $15,000 capital gain this year, would I only be taxed on the $5000 gain, i.e., $10,000 of my $15,000 gain would be directly offset by my $10,000 loss carry forward?

Example 2: Same as above but the positions are investments I would like to continue to hold. Let's say I buy them back on January 2, 2013. By doing this I step up my cost basis, a positive thing from a tax standpoint though I stand to miss out on any big moves up in the positions, but that's a risk I am prepared to take given the improved basis. Does this make sense?

Thank you.
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sat Dec 29, 2012 2:14 pm

1. If you have $10K in carryover losses from previous years and $15K of cap gains this year, then your net cap gains will be $5K. This is easily seen by using your tax software or the paper forms.

2. You would be able to sell on Dec 31st and buy back on January 2. It is conceivable that something could cause a move of say 2% to 3% between the two dates. The move could be up or down.

Let's say next year cap gains taxes go up from 15% to 20%. 5% of that $5000 gain is just $250. It seems to me that any "big move" would amount to more than a $250 change in your position. Thus, I would not risk being out of the market myself.

3. Why can't you buy/sell on Dec 31st? Why be out of the market even one day? If your financial institution won't let you do that, it is time to change financial institutions.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby jsl11 » Sat Dec 29, 2012 2:22 pm

If you don't use up your loss carryover by offsetting gains, you can use $3000 of it each year to offset ordinary income. Since ordinary income is taxed at higher rates than capital gains, this may be a better use of the carryover.
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sat Dec 29, 2012 2:23 pm

^Right, you will probably gain $250 in 2012 just from having your AGI reduced by $3000.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby grabiner » Sat Dec 29, 2012 2:57 pm

rjbraun wrote:Example 1: Let's say I have a $10,000 loss carry forward from 2008. If I sell mutual funds and / or stocks that result in a $15,000 capital gain this year, would I only be taxed on the $5000 gain, i.e., $10,000 of my $15,000 gain would be directly offset by my $10,000 loss carry forward?

Example 2: Same as above but the positions are investments I would like to continue to hold. Let's say I buy them back on January 2, 2013. By doing this I step up my cost basis, a positive thing from a tax standpoint though I stand to miss out on any big moves up in the positions, but that's a risk I am prepared to take given the improved basis. Does this make sense?


The strategy in example 1 makes sense if you want to sell the stocks anyway, but only if you pay a higher tax rate on capital gains next year (either because Congress raises the rate or because you pay 0% this year).

Suppose you are in a 25% tax bracket. In 2013, the capital-gains tax rate rises to 20%. Suppose that you wait until 2013 to sell.

2012: Offset $3000 of ordinary income, carry over $7000 loss, get $750 back in tax.
2013: Capital gain of $8000, pay $1600 in tax.
Total tax cost: $850 (but only $450 if the tax rate stays the same).

For comparison, if you sell in 2012:

2012: Capital gain of $5000, pay $750 in tax.

The strategy in example 2 doesn't help; if you want to hold the stocks, you should continue to hold them and let your carryover loss offset ordinary income.

Suppose you are in a 25% bracket and don't sell until 2020. In 2020, the stocks have gained an additional $15,000, and the capital-gains tax rate is 20%.

2012: Offset $3000 of ordinary income, carry over $7000 loss, get $750 back in tax.
2013: Offset $3000 of ordinary income, carry over $4000 loss, get $750 back in tax.
2014: Offset $3000 of ordinary income, carry over $1000 loss, get $750 back in tax.
2015: Offset $1000 of ordinary income, get $250 back in tax.
2020: Sell stocks for $30,000 capital gain, pay $6000 tax.
Total tax cost: $3500.

Now, suppose you sell in 2012, buy back immediately, and then sell again in 2020.
2012: Offset $10,000 of the $15,000 capital gain, pay $750 tax.
2020: Sell stocks for $15,000 capital gain, pay $3000 tax.
Total tax cost: $3750.

And it's actually even worse than this, because you can invest your $750 tax savings from 2012 and have more than $750 in 2020.
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sat Dec 29, 2012 3:00 pm

5-year long-term cap gains tax rate is 18%, right?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Sat Dec 29, 2012 3:15 pm

livesoft wrote:3. Why can't you buy/sell on Dec 31st? Why be out of the market even one day? If your financial institution won't let you do that, it is time to change financial institutions.


Thanks for the replies everyone. I will read them carefully later when I have the time. Meanwhile, in answer to the above the financial institution is Vanguard(!), fwiw. I'm pretty sure my rep said that I could only buy via an order submitted by mail. The funds in question would be index funds
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Re: Personal taxes: offsetting capital gains with losses

Postby sscritic » Sat Dec 29, 2012 3:30 pm

livesoft wrote:5-year long-term cap gains tax rate is 18%, right?

It depends which year you are living in and what next year will be tax wise. Some say next year will be 2001, but others have a different opinion. We shouldn't express our opinions here until the latter part of next week. I like the term "super long-term."
Certain assets held for more than 5 years are eligible for a super long-term capital gain rate of 18%.
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Re: Personal taxes: offsetting capital gains with losses

Postby sscritic » Sat Dec 29, 2012 3:35 pm

rjbraun wrote: I'm pretty sure my rep said that I could only buy via an order submitted by mail.

This is not correct. You can also sell via an order submitted by mail. How fast is your postman? If you had sent a letter a few days ago, I am fairly certain it would reach Pennsylvania by Monday if not sooner.
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Re: Personal taxes: offsetting capital gains with losses

Postby JDCPAEsq » Sat Dec 29, 2012 3:54 pm

Are you sure you still have a $10,000 carryover from 2008? You may have consumed some of that in 2009, 2010 and 2011.
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Re: Personal taxes: offsetting capital gains with losses

Postby sscritic » Sat Dec 29, 2012 3:56 pm

Even if you could do both on the web, what would that mean? Can you sell and buy on the same day in a mutual fund? You can in an ETF or a stock (that's what day traders do, trade in one day), but I don't know of any mutual fund company where you can sell and buy in the same day (with the same trade date). I am not that familiar with other fund companies, so they may exist. Have you found one?

If you get your order in on time, your trade date will be that day. Now if you do an exchange, you can sell and buy on the same day, but not in the same fund.
You may request a redemption of shares and request an exchange (using the proceeds from the redemption of shares of one Vanguard fund to simultaneously purchase shares of a different Vanguard fund) through our website at Vanguard.com if you are a registered user.

I don't even know what it means to exchange 100 shares of TSM for 100 shares of TSM, not if the exchange is a simultaneous sell and buy.
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sat Dec 29, 2012 4:17 pm

I tried to submit an order to exchange 100 shares of VLCAX to VLACX today at the Vanguard web site. The interface would not let me.

This is where multiple vendors might help you. At WellsFargo exchange $100,000 of VTSSX into VVISX. At Vanguard exchange $100,000 of VVIAX into VTSAX.

I also showed a trade(s) where I sold some shares of VCSH to myself -> viewtopic.php?p=1488409#p1488409
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby jsl11 » Sat Dec 29, 2012 5:06 pm

Can you simultaneously exchange fund A to fund B, and fund B to fund A, if you have holdings in both funds to start?

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Re: Personal taxes: offsetting capital gains with losses

Postby brad_g » Sat Dec 29, 2012 5:08 pm

Doesn't the strategy proposed by the OP run afoul of wash trade rules?

http://www.bogleheads.org/wiki/Wash_sale
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sat Dec 29, 2012 5:10 pm

^No. No wash sale possible if sale realizes gains.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby jsl11 » Sat Dec 29, 2012 5:11 pm

brad_g wrote:Doesn't the strategy proposed by the OP run afoul of wash trade rules?

http://www.bogleheads.org/wiki/Wash_sale

Not if you sell at a gain. Wash sale rules only apply to sales at a loss.
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sat Dec 29, 2012 5:12 pm

jsl11 wrote:Can you simultaneously exchange fund A to fund B, and fund B to fund A, if you have holdings in both funds to start?

Jeff

I cannot try that on the Vanguard web site because I only have a fund A and no fund B.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby sscritic » Sat Dec 29, 2012 5:17 pm

jsl11 wrote:
brad_g wrote:Doesn't the strategy proposed by the OP run afoul of wash trade rules?

Not if you sell at a gain. Wash sale rules only apply to sales at a loss.
Jeff

Wash sale is such a misleading term. The fact is that the sale is not washed, only the losses on the sale are washed (and then, perhaps only temporarily).

If we used wash loss, then no one would think a wash loss was a wash gain. No, I take it back; I am probably being too optimistic to think that people wouldn't confuse a wash loss with a wash gain.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Sun Dec 30, 2012 2:39 pm

livesoft wrote:Let's say next year cap gains taxes go up from 15% to 20%. 5% of that $5000 gain is just $250. It seems to me that any "big move" would amount to more than a $250 change in your position. Thus, I would not risk being out of the market myself.

But if I have a lot of capital gains and can get a nice "step-up" in my cost basis, it seems like it's worth the risk of being out of the market for a day, especially if it's, say, less than 10% of my total portfolio, I would think.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Sun Dec 30, 2012 2:40 pm

JDCPAEsq wrote:Are you sure you still have a $10,000 carryover from 2008? You may have consumed some of that in 2009, 2010 and 2011.
John

Yes. I'm working off of the loss carry forward I reported in my 2011 tax return
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sun Dec 30, 2012 2:47 pm

rjbraun wrote:
livesoft wrote:Let's say next year cap gains taxes go up from 15% to 20%. 5% of that $5000 gain is just $250. It seems to me that any "big move" would amount to more than a $250 change in your position. Thus, I would not risk being out of the market myself.

But if I have a lot of capital gains and can get a nice "step-up" in my cost basis, it seems like it's worth the risk of being out of the market for a day, especially if it's, say, less than 10% of my total portfolio, I would think.

We calculated that the "step-up" you are writing about would save you a mere $250 in taxes while being out of the market for one day might cost you more than $1,000. Those 4:1 odds are not something I would go against.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Sun Dec 30, 2012 3:08 pm

sscritic wrote:
rjbraun wrote: I'm pretty sure my rep said that I could only buy via an order submitted by mail.

This is not correct. You can also sell via an order submitted by mail. How fast is your postman? If you had sent a letter a few days ago, I am fairly certain it would reach Pennsylvania by Monday if not sooner.

What I meant is that Vanguard's "Frequent-Trading Limitations" policy would prevent me from selling shares in a fund, and then buying any back via an online purchase. The policy would allow me to purchase shares again -- if the purchase was done via the mail. I suppose I could just buy an ETF for the same or a similar index, however.

The information below is an excerpt from a Vanguard prospectus for an equity-index fund:

Frequent-Trading Limitations
Because excessive transactions can disrupt management of a fund and increase the fund’s costs for all shareholders, the board of trustees of each Vanguard fund places certain limits on frequent trading in the funds. Each Vanguard fund (other than money market funds and short-term bond funds) limits an investor’s purchases or exchanges into a fund account for 60 calendar days after the investor has redeemed or exchanged out of that fund account. ETF Shares are not subject to these frequent- trading limits.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Sun Dec 30, 2012 3:13 pm

livesoft wrote:
rjbraun wrote:
livesoft wrote:Let's say next year cap gains taxes go up from 15% to 20%. 5% of that $5000 gain is just $250. It seems to me that any "big move" would amount to more than a $250 change in your position. Thus, I would not risk being out of the market myself.

But if I have a lot of capital gains and can get a nice "step-up" in my cost basis, it seems like it's worth the risk of being out of the market for a day, especially if it's, say, less than 10% of my total portfolio, I would think.

We calculated that the "step-up" you are writing about would save you a mere $250 in taxes while being out of the market for one day might cost you more than $1,000. Those 4:1 odds are not something I would go against.

Ah, I see. Actually, those numbers I gave in the example are not the actual numbers; I made them up just as an example. The actual numbers are probably multiples of what I used for illustrative purposes. But I still need to work through things (e.g., whether my loss carry forward may be bigger, because I sold some stock this year, just how large my capital gain on the fund sale could be, etc.)

Edit: So I'm not clear, if my numbers are actually multiples of my example above, are you suggesting that being out of the market would be even more potentially damaging from an economic standpoint? If so, I suppose I could buy ETF's to gain the market exposure
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Re: Personal taxes: offsetting capital gains with losses

Postby sscritic » Sun Dec 30, 2012 3:29 pm

rjbraun wrote:
sscritic wrote:
rjbraun wrote: I'm pretty sure my rep said that I could only buy via an order submitted by mail.

This is not correct. You can also sell via an order submitted by mail. How fast is your postman? If you had sent a letter a few days ago, I am fairly certain it would reach Pennsylvania by Monday if not sooner.

What I meant is that Vanguard's "Frequent-Trading Limitations" policy would prevent me from selling shares in a fund, and then buying any back via an online purchase. The policy would allow me to purchase shares again -- if the purchase was done via the mail. I suppose I could just buy an ETF for the same or a similar index, however.

The word sell is not the same as the word buy. I said you could sell by mail. Am I wrong?

And what happens if you sell by mail? Can you buy back online one day later or do you have to wait sixty days? I think the correct answer is one, not sixty. Read the policy again.

This is all covered in the wiki. What you can't do is go online for both the buy and the sell, but if either the buy or the sell is by mail then the corresponding sell and buy can be online.
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Sun Dec 30, 2012 3:40 pm

rjbraun wrote:...
Edit: So I'm not clear, if my numbers are actually multiples of my example above, are you suggesting that being out of the market would be even more potentially damaging from an economic standpoint? If so, I suppose I could buy ETF's to gain the market exposure

Yes. Even though the past 12 months have had remarkably low-volatility, this next week will be interesting. Will the tax savings from tax-gain-harvesting amount to more than 1% of your position? If not, I would question the reason to do it.

Indeed, if the market drops, you get less gains or more losses by waiting. If the market goes up and you were out of the market, you don't get those gains. Thus, it appears to be a lose-lose situation to me.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Mon Dec 31, 2012 1:44 pm

sscritic wrote:
rjbraun wrote:
sscritic wrote:
rjbraun wrote: I'm pretty sure my rep said that I could only buy via an order submitted by mail.

This is not correct. You can also sell via an order submitted by mail. How fast is your postman? If you had sent a letter a few days ago, I am fairly certain it would reach Pennsylvania by Monday if not sooner.

What I meant is that Vanguard's "Frequent-Trading Limitations" policy would prevent me from selling shares in a fund, and then buying any back via an online purchase. The policy would allow me to purchase shares again -- if the purchase was done via the mail. I suppose I could just buy an ETF for the same or a similar index, however.

The word sell is not the same as the word buy. I said you could sell by mail. Am I wrong?

And what happens if you sell by mail? Can you buy back online one day later or do you have to wait sixty days? I think the correct answer is one, not sixty. Read the policy again.

Yes, you can sell by mail but that doesn't mean you can buy back the same fund shares online inside of 60 days. The mode of transaction (i.e., phone, mail, online) doesn't matter; the timeframe is what Vanguard tracks to determine whether a transaction adheres to the "Frequent-Trading Limitations" policy.
sscritic wrote:This is all covered in the wiki. What you can't do is go online for both the buy and the sell, but if either the buy or the sell is by mail then the corresponding sell and buy can be online.

That is not in line with what the Vanguard representative I spoke with this morning told me.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Mon Dec 31, 2012 2:00 pm

livesoft wrote:
rjbraun wrote:...
Edit: So I'm not clear, if my numbers are actually multiples of my example above, are you suggesting that being out of the market would be even more potentially damaging from an economic standpoint? If so, I suppose I could buy ETF's to gain the market exposure

Yes. Even though the past 12 months have had remarkably low-volatility, this next week will be interesting. Will the tax savings from tax-gain-harvesting amount to more than 1% of your position? If not, I would question the reason to do it.

Indeed, if the market drops, you get less gains or more losses by waiting. If the market goes up and you were out of the market, you don't get those gains. Thus, it appears to be a lose-lose situation to me.

Okay, thanks livesoft -- and to others who have responded to my OP. I have to admit, I find the whole tax code and how to apply it to investment decisions confusing. Nevertheless it is something I would like to -- if not master -- at least comprehend well enough to enable me to make appropriate and thoughtful decisions. Something to strive for in the new year and beyond ...
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Re: Personal taxes: offsetting capital gains with losses

Postby sscritic » Mon Dec 31, 2012 2:49 pm

rjbraun wrote:Yes, you can sell by mail but that doesn't mean you can buy back the same fund shares online inside of 60 days. The mode of transaction (i.e., phone, mail, online) doesn't matter; the timeframe is what Vanguard tracks to determine whether a transaction adheres to the "Frequent-Trading Limitations" policy.

Maybe I am reading this incorrectly:
The frequent-trading policy does not apply to the following:
• Purchases of shares with reinvested dividend or capital gains distributions.
• Transactions through Vanguard’s Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, and Vanguard Small Business Online®.
• Redemptions of shares to pay fund or account fees.
Transaction requests submitted by mail to Vanguard from shareholders who hold their accounts directly with Vanguard. (Transaction requests submitted by fax, if otherwise permitted, are not mail transactions and are subject to the policy.)

The mode matters, if the mode is mail. I don't know how else to read this. Note that the words are transaction requests, not purchases, as used in the first bullet. If only purchases by mail escaped the frequent trading policy, I assume they would have used the word purchases. They didn't, so I conclude that both sales and purchases (transactions) by mail avoid the frequent trading policy.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Mon Dec 31, 2012 3:17 pm

sscritic wrote:
rjbraun wrote:Yes, you can sell by mail but that doesn't mean you can buy back the same fund shares online inside of 60 days. The mode of transaction (i.e., phone, mail, online) doesn't matter; the timeframe is what Vanguard tracks to determine whether a transaction adheres to the "Frequent-Trading Limitations" policy.

Maybe I am reading this incorrectly:
The frequent-trading policy does not apply to the following:
• Purchases of shares with reinvested dividend or capital gains distributions.
• Transactions through Vanguard’s Automatic Investment Plan, Automatic Exchange Service, Direct Deposit Service, Automatic Withdrawal Plan, Required Minimum Distribution Service, and Vanguard Small Business Online®.
• Redemptions of shares to pay fund or account fees.
Transaction requests submitted by mail to Vanguard from shareholders who hold their accounts directly with Vanguard. (Transaction requests submitted by fax, if otherwise permitted, are not mail transactions and are subject to the policy.)

The mode matters, if the mode is mail. I don't know how else to read this. Note that the words are transaction requests, not purchases, as used in the first bullet. If only purchases by mail escaped the frequent trading policy, I assume they would have used the word purchases. They didn't, so I conclude that both sales and purchases (transactions) by mail avoid the frequent trading policy.

That's possible. The above seems to allow for transactions within a 60-day period IF both requests are via mail. What the rep told me this morning, and what I intended to write in my prior message (which I concede, in hindsight, could have been unclear), is that it doesn't matter if you submit the sell order via mail and then want to buy back the position online within 60 days.

That said, if you do the sale and purchase via mail, my understanding is that you can't be guaranteed same day execution, i.e., you could end up buying more shares before you sold the original position, or vice versa. I specifically asked Vanguard if you could specify in a mail transaction the trade execution date. The answer was no, the transaction would occur whenever the request was received by Vanguard. If that's the case, then you still risk an unintended market exposure.
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Re: Personal taxes: offsetting capital gains with losses

Postby JW Nearly Retired » Mon Dec 31, 2012 5:57 pm

rjbraun,
Can you explain why you are doing this? Seems like the $10,000 loss would usually be better used to offset ordinary income over the next 4 years?
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Re: Personal taxes: offsetting capital gains with losses

Postby livesoft » Mon Dec 31, 2012 6:02 pm

I think any possible timing in this thread has kinda expired, right?
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Mon Dec 31, 2012 7:32 pm

JW Nearly Retired wrote:rjbraun,
Can you explain why you are doing this? Seems like the $10,000 loss would usually be better used to offset ordinary income over the next 4 years?
JW

JW, I believe the idea was originally suggested to me by someone at Vanguard. Frankly, I did not completely follow his advice, and it's even possible that I misunderstood what he was saying. Fortunately (I think), I wasn't comfortable acting on the suggestion without better comprehending the whole thing. That was why I posted, as a means to try to get my arms around things as well as to try to better understand taxes and how they apply to one's personal situation.

Does that make sense, at least kind of ...?
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Re: Personal taxes: offsetting capital gains with losses

Postby rjbraun » Mon Dec 31, 2012 7:33 pm

livesoft wrote:I think any possible timing in this thread has kinda expired, right?

Yes, certainly for the 2012 tax year.
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Re: Personal taxes: offsetting capital gains with losses

Postby JW Nearly Retired » Mon Dec 31, 2012 8:59 pm

rjbraun wrote:
JW Nearly Retired wrote:rjbraun,
Can you explain why you are doing this? Seems like the $10,000 loss would usually be better used to offset ordinary income over the next 4 years?
JW

JW, I believe the idea was originally suggested to me by someone at Vanguard. Frankly, I did not completely follow his advice, and it's even possible that I misunderstood what he was saying. Fortunately (I think), I wasn't comfortable acting on the suggestion without better comprehending the whole thing. That was why I posted, as a means to try to get my arms around things as well as to try to better understand taxes and how they apply to one's personal situation.

Does that make sense, at least kind of ...?

I guess that explains why you posted. It doesn't explain why you don't want to do a more conventional TLH approach, i.e., sell losers and carry the losses as long as it takes to write them off from your ordinary income at the $3000/yr allowed. That gets back a percentage of the loss at whatever your marginal tax rate is. You try to avoid selling gainers because then your losses are used up at the lesser cap gains tax rate.
I have a ton of carry over losses from 08/09 that will probably last a lifetime. Your heirs will get the taxable funds with gains at a stepped up basis. Or maybe you can sell them at some time when you are in a low tax bracket.
JW
see the wiki on it http://www.bogleheads.org/wiki/Tax_Loss_Harvesting
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