odiousgambit
odiousgambit
Joined: Nov 9, 2009
  • Threads: 314
  • Posts: 8826
July 12th, 2012 at 12:38:51 AM permalink
Got 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.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
RoundMan
RoundMan
Joined: Jul 2, 2012
  • Threads: 2
  • Posts: 55
July 12th, 2012 at 4:19:16 AM permalink
I took gains earlier in the year, but did not immediately buy back
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).
odiousgambit
odiousgambit
Joined: Nov 9, 2009
  • Threads: 314
  • Posts: 8826
July 12th, 2012 at 8:24:12 AM permalink
Quote: RoundMan

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).



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.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
RaleighCraps
RaleighCraps
Joined: Feb 20, 2010
  • Threads: 79
  • Posts: 2501
July 12th, 2012 at 8:41:53 AM permalink
Quote: odiousgambit

Got 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
Always borrow money from a pessimist; They don't expect to get paid back ! Be yourself and speak your thoughts. Those who matter won't mind, and those that mind, don't matter!
TheBigPaybak
TheBigPaybak
Joined: May 14, 2012
  • Threads: 14
  • Posts: 437
July 12th, 2012 at 9:25:43 AM permalink
Quote: odiousgambit

Got 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.
Lack of prior planning on your part doesn't constitute an emergency on my part.
odiousgambit
odiousgambit
Joined: Nov 9, 2009
  • Threads: 314
  • Posts: 8826
July 13th, 2012 at 12:37:10 AM permalink
Quote: RaleighCraps

By '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.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
RaleighCraps
RaleighCraps
Joined: Feb 20, 2010
  • Threads: 79
  • Posts: 2501
July 13th, 2012 at 1:09:07 PM permalink
So I am trying to figure out the wisdom of taking the profit now, and paying taxes now, while increasing your cost basis in your stock.

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?
Always borrow money from a pessimist; They don't expect to get paid back ! Be yourself and speak your thoughts. Those who matter won't mind, and those that mind, don't matter!
odiousgambit
odiousgambit
Joined: Nov 9, 2009
  • Threads: 314
  • Posts: 8826
July 15th, 2012 at 4:20:57 AM permalink
Quote: RaleighCraps

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?



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]
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
RaleighCraps
RaleighCraps
Joined: Feb 20, 2010
  • Threads: 79
  • Posts: 2501
July 15th, 2012 at 9:21:13 AM permalink
Quote: odiousgambit

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]



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.
Always borrow money from a pessimist; They don't expect to get paid back ! Be yourself and speak your thoughts. Those who matter won't mind, and those that mind, don't matter!
odiousgambit
odiousgambit
Joined: Nov 9, 2009
  • Threads: 314
  • Posts: 8826
July 15th, 2012 at 2:44:14 PM permalink
Quote: RaleighCraps

No. 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.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder

  • Jump to: