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Financial Planning / Tax Strategies


Subject:  Re: Tax loss harvesting possible with MLPs? REIT Date:  8/7/2013  2:56 AM
Author:  Jeanwa Number:  118988 of 127753

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.

I used to think this was possible. I checked dividend paying stock after dividend paying stock. Never did I find a buy or a sell time. I suggest you do what I did. Go back over the past year or so and check out the stocks at dividend time. Where would you place the buy and sell? Would you just put the order in at market? There's no telling a what price it would cost or sell for. Limit orders, no idea if it would even trigger.

Here's the NLY chart. Where and when would you have place the buy and sell orders and at what price? Remember Hindsight is 20/20.

Do it on paper for a bit to see if it works.

That said. I wouldn't buy or sell a stock because of taxes...loss or gain. I certainly wouldn't for a loss.
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