Benefits of a FIFO world versus Tax Harvesting world

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David Scubadiver
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Benefits of a FIFO world versus Tax Harvesting world

Post by David Scubadiver » Wed Nov 15, 2017 2:48 pm

So, in theory, one can imagine a world in which one is no longer permitted to select individual lots when making a sale.
Were we to live in such a world, how would it change your situation?

I think it might dramatically lower the value of Betterment, Wealthfront and FolioFN because tax loss harvesting suddenly becomes more difficult.
I think it would also simplify my life because it would be one less thing to really worry about, since tax loss harvesting would suddenly become less beneficial since there is less to harvest if one is required to sell the first acquired shares.

Query whether there is a way to profit on the potential of such a world, or a way to profit on the potential of such a world not coming to be (assuming the market were hypothetically pricing in a world where the ability to tax loss harvest were negatively impacted.

This has nothing to do with any tax reform. It is purely a hypothetical question.

livesoft
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Re: Benefits of a FIFO world versus Tax Harvesting world

Post by livesoft » Wed Nov 15, 2017 2:54 pm

Let me add a complication:

Perhaps in a FIFO world, I would transfer-in-kind old shares with gains to another financial institution leaving me with the newer shares with losses in place for tax-loss harvesting.
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TomatoTomahto
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Re: Benefits of a FIFO world versus Tax Harvesting world

Post by TomatoTomahto » Wed Nov 15, 2017 3:02 pm

livesoft wrote:
Wed Nov 15, 2017 2:54 pm
Let me add a complication:

Perhaps in a FIFO world, I would transfer-in-kind old shares with gains to another financial institution leaving me with the newer shares with losses in place for tax-loss harvesting.
Oh no! Then there would be endless questions about the break-even point of Investor vs Admiral shares when segregating assets via time of purchase. Just. Say. No.

livesoft
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Re: Benefits of a FIFO world versus Tax Harvesting world

Post by livesoft » Wed Nov 15, 2017 3:11 pm

^Probably not. ETFs Rule!
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David Scubadiver
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Re: Benefits of a FIFO world versus Tax Harvesting world

Post by David Scubadiver » Wed Nov 15, 2017 3:48 pm

livesoft wrote:
Wed Nov 15, 2017 2:54 pm
Let me add a complication:

Perhaps in a FIFO world, I would transfer-in-kind old shares with gains to another financial institution leaving me with the newer shares with losses in place for tax-loss harvesting.
That would be an interesting issue that presumably would be resolved the same way wash sales are resolved. You answer the question, "Do you own shares at another institution which were acquired before the shares you sold?" If you sold the shares at a loss, it would constitute a wash sale (or its equivalent) and the basis could be adjusted at the new firm.

Of course, if loophole were left open I can envision great benefits to having multiple accounts. They don't even have to be held at another institution!

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LadyGeek
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Re: Benefits of a FIFO world versus Tax Harvesting world

Post by LadyGeek » Wed Nov 15, 2017 4:37 pm

This thread has run its course and is locked (proposed legislation regarding Specific identification of shares). See my post here: Political comments and proposed tax plan remain off-topic
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