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Author: eurobask Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121113  
Subject: Question - $3000 tax writeoff Date: 9/25/2005 10:17 PM
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I am looking for advice on the best strategy to handle selling of Tyco (TYC) shares that are considerably lower than what I bought them at a few years ago, in hopes of taking advantage of reducing my taxable income by $3000. Do I sell the shares that have dropped in price the most first, and then do the same in the coming years, up to the $3000 tax-writeoff limit, until I have sold all my shares? I say this with my belief that Tyco shares will not be appreciating at a higher rate than what I can find elsewhere, especially with the fact they don't have a huge dividend yield (1% I think, not much for a large conglomerate, and one that's trying to pay off a huge amount of debt).

A recent Fool.com article does have me wondering though, "Should I hold?". Warren Buffet, it was announced recently in a Fool article, has even purchased 5 million shares of TYC (http://www.fool.com/News/mft/2005/mft05081609.htm?ref=foolwatch ), as I do agree it is a solid company now. But, prior to getting any feedback from this post, I'm inclined to sell at this point, and reinvest the cash in some other, more promising stocks.

I used to work for Tyco International (Dennis Koslowski has made it famous) from 2000 to 2002, which covered the period when their stock made them Wall Street's darling at $60/share at the end of 2001/beginning of 2002. Tyco hit bottom, near $6 in June/July of 2002, as is now back up to $28.93 as of Friday. .

Well, during that time, I got caught up in the fervor and bought $13,340 in shares, dollar-cost averaging each month (about 270 shares I own now) from December of 2000 to March of 2002. I actually only paid $11,600 with a 15% discount through an ESPP employee stock purchase plan for the $13,340 in value of TYC stock. I should have been more cautious and done due diligence, but honestly didn't understand much at all then about valuation of stocks at that time. I just saw the 15% discount for a "hot" stock and wanted to begin investing, as I was just out of college.

So with that said, would anyone have advice on how best to handle my situation?

Thanks
eurobask
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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80843 of 121113
Subject: Re: Question - $3000 tax writeoff Date: 9/25/2005 10:32 PM
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I can't and won't tell you whether to sell, but if you do decide to sell, I would sell all your holdings. There's no advantage to selling off $3000 in losses at a time. You can use the excess losses against any gains you might realize in other stocks, and any unused gain gets carried forward to future years.

Forget what has happened in the past, that's history. Look at the value of your TYC stock today. If you think you can invest that dollar amount in another stock and get a better return going forward than you will in TYC, you should sell and move on. If you think your return in TYC, starting from today's value, will be better than some other investment, then you should keep your TYC investment.

Buffet is buying because he believes he will get an adequate return on his investment. Of course, you don't know how Buffet defines an adequate return, nor over what time period he is willing to wait. There will always be someone who thinks they will get an adequate return from today's price -- otherwise you would never be able to sell your stock.

Choose the path that makes the most sense to you -- whatever that may be.

Ira

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 80844 of 121113
Subject: Re: Question - $3000 tax writeoff Date: 9/26/2005 2:29 AM
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You can use the excess losses against any gains you might realize in other stocks, and any unused gain gets carried forward to future years.

Sorry, that should be... You can use the excess losses against any gains you might realize in other stocks, and any unused loss gets carried forward to future years.

Ira

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