Advisors are starting to say you may want to sell those stocks, then buy them back immediately, realize the gain and go ahead and pay the tax. But also saying, hold off for now to be sure [and stay tuned].
The tax on it is almost for sure going up next year.
the same stock. I sold because the stock was overpriced.
Selling for tax reasons, as you stated, can be a good move, but
to my knowledge, long-term cap gains seem likely to remain at
15% (unless your one of the "rich fat cats" Obama wants to
punish for being successful).
Quote: RoundManSelling for tax reasons, as you stated, can be a good move, but
to my knowledge, long-term cap gains seem likely to remain at
15% (unless your one of the "rich fat cats" Obama wants to
punish for being successful).
What I am hearing is that it is slated to go up, and it will require action to stay at 15%. I don't seem to be hearing that will just affect fat cats.
Quote: odiousgambitGot a big capital gains situation on certain stocks?
Advisors are starting to say you may want to sell those stocks, then buy them back immediately, realize the gain and go ahead and pay the tax. But also saying, hold off for now to be sure [and stay tuned].
The tax on it is almost for sure going up next year.
By 'buy them back immediately' I assume you mean buy them back after the required 31 day wait period, don't you?
Otherwise, you are triggering the wash sale rule.
http://www.irs.gov/pub/irs-pdf/p550.pdf pg 60 for Wash Sale Rules
|Edit: While my post is not wrong, it is also apparently not applicable to a "gain". Wash sales are concerned with "Losses".
So, you are suggesting if I had long term capital gains (let's say I made $10/shr on 1,000 shrs. and the new shr price is $20) I should sell, and immediately buy back for $20,000.
I pay $1500 in taxes, and now my cost basis for the same 1000 shares I had is $20,000.
hmmmmmmmm
Quote: odiousgambitGot a big capital gains situation on certain stocks?
Advisors are starting to say you may want to sell those stocks, then buy them back immediately, realize the gain and go ahead and pay the tax. But also saying, hold off for now to be sure [and stay tuned].
The tax on it is almost for sure going up next year.
I suppose it will depend on who wins the election. Hasn't Romney pledged to cut capital gains taxes- at least for those making less than 250k/year?
I plan on waiting to see who wins the election and then taking appropriate action as there will be window to do so for tax year 2012.
Quote: RaleighCrapsBy 'buy them back immediately'
As you note you needn't be concerned about wash sale rules if you have a gain. To buy them back immediately is to realize the gain without trying to do market timing. Of course it'd be pretty smart to rebalance the portfolio if that is needed.
Perhaps set aside some money for the taxes, eh? Or wait till April to sell some then? Well, they tell you not to do market timing, but who doesnt try anyway? I certainly find I do it when I *have to* buy or sell anyway, as may be the case here.
One thing that strikes me is the value of money vs time. Suppose someone had taken this step in 1980, and paid taxes on their $10,000 gain. And let's say they paid 15% or $1500. But that $1500 that was paid in 1980 is not worth 1500 today. It would be worth considerably more in today dollars.
So doesn't the decline of the dollar over time need to be considered to determine if sell now vs later is a good move?
Quote: RaleighCrapsSo doesn't the decline of the dollar over time need to be considered to determine if sell now vs later is a good move?
That person, waiting, would just be waiting to pay in more valuable dollars? Maybe I'm not sure about that one, if not selling at a lower tax rate.
[edited out some cloudy thinking]
Quote: odiousgambitThat person, waiting, would just be waiting to pay in more valuable dollars? Maybe I'm not sure about that one, if not selling at a lower tax rate.
[edited out some cloudy thinking]
No. The person 'waiting' would end up paying taxes on less valuable dollars.
If you had to pay a $1500 tax bill, would you rather pay it now, or 20 years from now? It is almost certain that $1500 goes further today than it will in 2030, thus you are paying a higher cost by paying today.
What I don't know how to do is determine what the value of this cost is. It may be too small to be much of a factor.
Quote: RaleighCrapsNo. The person 'waiting' would end up paying taxes on less valuable dollars.
That has to be right. There can't be any reason to sell if it wasn't for a rate increase.
The taxes owed won't stay at one flat amount. Maybe that matters. All I can tell you is, I didn't come up with this on my own; flat fee financial planners are advising doing this selling [thus not because of the commissions] as long as the new rate is not repealed.