The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Tax loss harvesting possible with MLPs? REIT||Date: 8/7/2013 12:49 AM|
|Author: Wradical||Number: 118987 of 122333|
Find a security that isn't an MLP that has a very high dividend yield, that you think has fundamental value (close to book or below) and that you don't think is going to go that far down. In the current climate, a REIT or REIT-alike may do (AGNC, AI, NLY.) Buy it before ex-dividend. Take your distribution, which (in the case of a REIT) will be taxed like regular income anyway. Sell the stock right after ex-dividend: it invariably generates a loss-that-isn't-quite-a-loss (because you were paid the dividend) in the days following. You get the dividend, the stock dives as it always does after ex-dividend, and you also get credit for the capital loss. Reinvest the money in a different REIT, or whatever great investment idea you happen to be entertaining. Repeat endlessly. $Profit.
Does this work, or is this broken? What am I missing?
You can try it. It might work. But it's a lot of blind faith in an Efficient Market Hypothesis, and markets don't move in a vacuum.
"a security that isn't an MLP that has a very high dividend yield," might be a $50 stock that pays a 4% yield, which is pretty high these days. That's $2.00/yr, per share, in dividends, or 50¢/share per quarter. And you're going to buy and sell around a dividend like that? With the prevailing market volatility in recent years, that's nothing.
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