I don't think this is plausible. If they actually have zero net capital gains they have been very unlucky or been poor investors. Since they are 55 they have been investing since 1980 or so. The S&P is currently higher than it has been for all but about 7 of those 30 years, so to have zero net gains their purchases must have been concentrated and very badly timed. Note that tax loss harvesting does not change net gains; compared to not TLH the extra realized losses are offset by extra unrealized gains so no net change due to TLH, it just changes the timing.livesoft wrote: They have been diligently tax-loss harvesting and the stock market has not done so well in the last few years, so their net gains in the taxable assets are essentially zero. That is, they have enough carryover losses to deduct $3,000 from ordinary income each year for quite a while. If they sell any taxable assets, the net capital gain will be essentially zero for a number of years.
So they don't have zero net gains, how much carry over loss do they have? I have worked some numbers and I don't think you can get to a plausible number of more than about 150,000 of carry over losses, unless they were really unlucky or really stupid. And perhaps 85% of their holdings (everything bought before 2009) will have a basis of 700 or less in the S&P. Livesoft has them taking 80,000 of capital per year tax free, and using 3000 per year of capital gains against ordinary income. By my reckoning the carryover losses will run out in the 5th year.