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Author: ecm3131 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: selling losers in the face of tax increase? Date: 11/29/2012 1:52 PM
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I have some huge gains this year that will cost me a pile of CG taxes, but I also have several MF stocks that are waaaaaaay down (FORM down 85%, IQNT down 86%, BPI, LOGI & PACR all down about 50%, and plenty of others down 30-40% .... you get the picture).
So, is it better to keep the high basis on those beat-up stocks in order to minimize future CG at what could be higher rates, or sell them now to offset my existing gains (that will "only" cost me 15%)? I was thinking I could buy the losers back just after the first of the year and start over with the lower basis, but some I may abandon altogether.
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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117020 of 121061
Subject: Re: selling losers in the face of tax increase? Date: 11/29/2012 3:52 PM
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was thinking I could buy the losers back just after the first of the year

Avoiding a wash sale requires staying out of a stock for 30 days after the sale date. "After the first of year" isn't specific.

Are the gains realized or not?

If the gains aren't realized and you are going to use the losses to offset gains, then it doesn't matter if you sell now or later. If you are dumping losers, $3,000 of the loss can be applied towards your regular income, and the rest of the loss carried forward.

My crystal ball is fuzzy. If the gains are realized, then using the losses guarantees a tax reduction for 2012. Taxes will probably be higher after 2012, but who knows exactly what the future holds.

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Author: ecm3131 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117025 of 121061
Subject: Re: selling losers in the face of tax increase? Date: 11/30/2012 4:48 PM
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Thanks VKG

The gains are realized and the taxes are going to happen unless I sell the losers, and I can pretty much eliminate the gains with the losers.

My choice is that doing so would create a larger "future" gain assuming I buy the losers back next year (after the wash rule requirement) and the CG rate will certainly be higher, or just pay the gain now (on the winners) at the lower rate.

One person told me to "fight the fire you're, not the one that might break out next week". I should lower my current taxes because the losers I sell might sell may never come back and I should not assume they will, thus I would be planning for an event that would be less likely to happen than the certainty of the current tax if I do nothing.

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Author: vkg Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 117026 of 121061
Subject: Re: selling losers in the face of tax increase? Date: 11/30/2012 5:40 PM
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Since the gains are realized, I would start will selling the losers that you aren't going to rebuy.

The compromise option is often my choice, sell enough to cover around half of your gains. It locks in some tax advantage now, and retains some for future year.

The current value of the tax deduction increases if the amount of gain is enough to trigger AMT. If does trigger AMT, then selling at least enough to eliminate AMT would make sense.

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