[[We all know what the wash sale rules are, they basically stop you from "artificially" lowering your basis.]]Not exactly. The wash sale rules were put into place to avoid you taking a tax loss, but basically having no real economic loss (since you bought the stock back at a lower price). The "lowering basis" is really just something that happens. [[ But I want to "artificially" INCREASE my basis. Why? Because the $$ are in a UGMA account where the first $700 of gains are tax-free. Is there a downside to this that I don't see? The $$ are invested in a no-load mutual fund, so there are no transaction fees for this paper excercise. Have I found a loophole?]]I don't know because I don't understand what you are trying to do. You mean simply sell something at a gain and then buy it right back? No problem there. Perfectly legal. You are simply managing your income. Not even a real loophole. We have been helping clients with that strategy for years. In fact, I think I even discuss it a bit in my post on UGMA accounts and the kiddie tax in the Taxes FAQ area. You might want to check it out.TMF TaxesRoyWant to learn more about taxes and investing? Then we have a deal for you!! The Motley Fool Investment Tax Guide is now available through Fool Mart. Don't be the LAST one on your block to own this masterpiece, since it's sellin' fast. Remember: It's never to early to start planning for your 1999 taxes. So just click on this link (http://www.foolmart.com/market/product.asp?pfid=MF+013+I) to read more about this amazing collection of tax information. (Apologies for the shameless plug…but it is a pretty good book…if I do say so myself). In addition, if you would like to visit the Taxes FAQ (Frequently Asked Questions) area, click on http://www.fool.com/school/taxes/taxes.htm and you'll be right at the home page. Check it out. Finally, if you need to get to the IRS web site, click on http://www.irs.ustreas.gov to go directly there.
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