Realize capital gain vs Qualified Dividend with Loss Carryover

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Topic Author
stepaway
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Joined: Mon Aug 12, 2013 1:11 pm

Realize capital gain vs Qualified Dividend with Loss Carryover

Post by stepaway »

Hi, I'm thinking of selling my French bank stocks next year and it pays dividends usually in May of each year.

My understanding is that LT capital gain and qualified dividends are treated the same tax-wise at 15% tax rate based on the 25% to 28% federal marginal tax rate. However, I do have loss carryover that I could use to offset the LT capital gain. So I assume that selling the stocks before it pays dividends is the best course to minimize my taxes. Is my conclusion correct? Please advise if I'm missing anything.

Also, when is the best time to sell? Should I plan to get as close as possible to the dividends payment date?
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FrankLUSMC
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Re: Realize capital gain vs Qualified Dividend with Loss Carryover

Post by FrankLUSMC »

mauwong wrote: Wed Dec 13, 2017 12:22 pm Also, when is the best time to sell? Should I plan to get as close as possible to the dividends payment date?
The dividend will still be qualified, so unless you are expecting a 5 figure dividend the 15% tax will not amount to that much more tax. If you do want to escape that dividend, you need to sell before the ex-dividend date for that stock and that is usually up to a month before the dividends payment date.
mega317
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Re: Realize capital gain vs Qualified Dividend with Loss Carryover

Post by mega317 »

I would sell when you no longer want to own the stock, and not let the dividend dictate it.

Tell us more about your loss carry over. I would want to use it to offset short term gains or income, so if you can find a way to do that it would be preferable. (E.g. you have 3k in losses and no gains, use up the losses on your income this year and then sell the stock in 2018.)
Topic Author
stepaway
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Re: Realize capital gain vs Qualified Dividend with Loss Carryover

Post by stepaway »

Thanks, FrankLUSMC. I will keep in mind the ex-dividend date.
mega317 wrote: Wed Dec 13, 2017 4:04 pm I would sell when you no longer want to own the stock, and not let the dividend dictate it.

Tell us more about your loss carry over. I would want to use it to offset short term gains or income, so if you can find a way to do that it would be preferable. (E.g. you have 3k in losses and no gains, use up the losses on your income this year and then sell the stock in 2018.)
I still have at least $15K in loss carryover which would be more than enough to offset $3K in income for this year and next year. I don't have any trading gains / losses this year (not counting the ones due to Vanguard's trading within the mutual funds).

I bought the bank stocks on discounted basis from my employer which required a 5-yr hold. My intention has always been to sell the bank stocks when they are freed from hold and reinvest them in the US or International Index fund. Since the timing works anyway, I could choose to sell before or after dividends depending on whether I could minimize the taxes due.
Topic Author
stepaway
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Joined: Mon Aug 12, 2013 1:11 pm

Re: Realize capital gain vs Qualified Dividend with Loss Carryover

Post by stepaway »

Taking the possibility of paying for the 3.8% Net Investment Income Tax related to ACA, it seems I should be better off realizing the capital gain with the offsetting loss carryover. Please advise if my conclusion is incorrect.
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