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Financial Planning / Tax Strategies


Subject:  Re: Tax loss harvesting possible with MLPs? REIT Date:  8/6/2013  2:37 PM
Author:  Wradical Number:  118980 of 127753

From what I've read, tax-loss harvesting does not work with MLPs. One person online suggested it can actually accelerate taxation. Is this correct in most scenarios in which one would sell MLPs that are down?

The problems with selling MLPs are:
1. You don't usually know, at the date you sell, what your actual basis is, since your basis in a MLP is constantly changing, with the partnership's income/losses/distributions.
2. Some of the sale will often be ordinary income, whether or not you have a gain or loss. And you don't know how much until you get your final K-1, usually.

I am wondering if REITs are also bad candidates for tax-loss harvesting. I'm guessing that's the case: it seems too easy to come up with a systematic method to harvest losses after distribution.

No, a REIT is really a mutual fund that invests in real estate (or mortgage loans) instead of securities. It works like a mutual fund, taking into account reinvested income.

But if you have a regular stock that distributes qualified dividends, could you collect the dividend, sell the security at a loss, keep the dividend, and enjoy some tax advantages?


Or are dividend distributions calculated into this, limiting your usable "loss"?

No. Dividends and your gain/loss are not related, except that they both flow to the tax calculation worksheet. But one does not limit the other.

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