What if I don't want to claim a capital loss?

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TheEternalVortex
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What if I don't want to claim a capital loss?

Post by TheEternalVortex »

I am planning on selling some of my taxable funds so I can put the money into my Roth for this year.

However, I expect to have very little taxable income and I'll probably be in the 10% tax bracket. So I gain very little by claiming the $1000 or so of loss I will have in the funds I will sell.

Is there any way I can get around doing that until some later time, when I have more income?
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LH2004
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Post by LH2004 »

Delay the sale until another year?

Construct a chain of wash sales -- keep buying it back within 30 days and re-selling immediately, and hope it stays in a loss position?
sport
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Re: What if I don't want to claim a capital loss?

Post by sport »

TheEternalVortex wrote:I am planning on selling some of my taxable funds so I can put the money into my Roth for this year.

However, I expect to have very little taxable income and I'll probably be in the 10% tax bracket. So I gain very little by claiming the $1000 or so of loss I will have in the funds I will sell.

Is there any way I can get around doing that until some later time, when I have more income?
You can delay the loss, if it still exists, until next year by making your 2008 Roth contribution between 1/1/09 and 4/15/09.
exeunt
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Post by exeunt »

You'll probably lose money if you hold off investing in your Roth for a full year.

Generating wash sales sounds like a huge waste of money.

I wouldn't worry too much about the tax consequences. Just invest.
Topic Author
TheEternalVortex
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Post by TheEternalVortex »

exeunt wrote:You'll probably lose money if you hold off investing in your Roth for a full year.

Generating wash sales sounds like a huge waste of money.

I wouldn't worry too much about the tax consequences. Just invest.
How will I lose money if I hold off investing for a full year? I'm already invested in the same thing in taxable--I just plan to move it to my Roth.
diasurfer
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off-topic

Post by diasurfer »

hi, I realize you posted this on a different thread, but you never responded and I thought you might want to clarify.
diasurfer wrote:
TheEternalVortex wrote:
It's mathematically impossible that adding an asset with lower (expected) returns will ever increase (expected) returns, regardless of their correlation. It may reduce volatility, however, particularly if they have low correlation.

I'm surprised nobody else responded to this.

Can you point me to a mathematical proof? No question if you are talking about simple weighted averages. Duh. But that number is not what dictates returns. Not sure if you are arguing semantics with "(expected)".

Go to Russell's applet.

http://www.usna.edu/Users/math/rkjackso ... tier2.html

Period: 1972-2006. Commodities return 8%. US stocks return 11.24%.

$1 in 100% US stock portfolio grows to $41.61.

$1 in 95% US stock and 5% commodities portfolio grows to $42.58.

I think Larry Swedroe also gives an example using bonds in his "Only Guide" book.
Wagnerjb
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Re: What if I don't want to claim a capital loss?

Post by Wagnerjb »

TheEternalVortex wrote:I am planning on selling some of my taxable funds so I can put the money into my Roth for this year.

However, I expect to have very little taxable income and I'll probably be in the 10% tax bracket. So I gain very little by claiming the $1000 or so of loss I will have in the funds I will sell.

Is there any way I can get around doing that until some later time, when I have more income?
I agree that wasting a tax loss when your marginal tax rate is 10% isn't wise (if you can avoid it).

How about borrowing the money this year? Next year, sell the taxable funds and pay off the loan. If your tax rate is higher than 10% next year you may find the higher tax benefits more than offset the interest costs.

Best wishes.
Andy
Wagnerjb
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Post by Wagnerjb »

After thinking about it, I see an additional point.

If you borrow the money this year, be sure to invest in your Roth in a fixed income fund. Then, when you sell your taxable asset (I assume this is equities), you should shift from fixed income to equities in the Roth.

If you borrow money this year and put it into equities in your Roth, you will be overweight equities and will have inadvertently added leverage to your investing.

Best wishes.
Andy
rwwoods
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Post by rwwoods »

You will not waste or loose a capital loss. Up to $3000 in capital loss can be used to offset income in a given year with the balance carried forward to the next tax year. As long as you file a tax return each year, you can continue to carry forward any unused portion of a capital loss.
adam1712
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Post by adam1712 »

Another possibility I see is using money from a money market account if you have that. You move that money to a similar money market account inside a Roth IRA to maintain the same AA. Then if you do have an emergency, you'd have to sell your holdings at a loss and transfer the MM money in the Roth to your equity position. But hopefully, you can wait and capture the loss in later years.
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