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I submitted this plan in the Berkshire Hathaway board and no responses received to date. May be more appropriate for the Tax Strategies board.

There have been a number of Threads in recent weeks related to strategies directed toward reducing Capital Gains and Dividends in 2013 assuming the worst in proposed tax rate increases.

As a long term BRK stockholder, and a daily reader of this board, I would like to try on a strategy so see if any one could offer pros or cons for implementing.

I currently own long term BRK-B’s with a gain, if sold of over $45,000.

I have carry over losses in my taxable account of about $50,000. (from a loss in another stock going way back.)

I am pretty certain that my Brokerage company will do a sale from my account of all my BRKB shares and simply transfer them back to my account at the price sold. ( I know I have had them sell shares in my IRA account and transfer them into my taxable account at the price at time of sale. That is what I do when taking my MRD each year.)

All my BRKB shares are showing a capital gain so there will be no problem of the Wash Sale rule taking effect.

I ran a trial run with my 2011 Tax Cut software and it totally offset the gains from the proposed sale with the carry over losses and there was no increase in taxes for the year.

I realize that the $50,000 carry over losses would cover many $3,000 yearly Capital Gains losses.

Doing this sale will enable me to reset my cost basis, many of which are in $55-65 range.

And I would be able to take advantage of the current 15% tax rate rather than the 23.8%.

Depending on responses I may also submit this question to the Tax Strategies board.
Thanking you for your consideration.
Senior Cit
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No. of Recommendations: 7
As a long term BRK stockholder, and a daily reader of this board, I would like to try on a strategy so see if any one could offer pros or cons for implementing.

I currently own long term BRK-B’s with a gain, if sold of over $45,000.

I have carry over losses in my taxable account of about $50,000. (from a loss in another stock going way back.)

I am pretty certain that my Brokerage company will do a sale from my account of all my BRKB shares and simply transfer them back to my account at the price sold. ( I know I have had them sell shares in my IRA account and transfer them into my taxable account at the price at time of sale. That is what I do when taking my MRD each year.)


Why are you doing this? You don't have to sell the shares in your IRA and repurchase them in your taxable account. Simply move the shares. Their value at the time of the transfer is the amount of your IRA distribution and your basis in the taxable account, and your holding period begins on the date of transfer.

All my BRKB shares are showing a capital gain so there will be no problem of the Wash Sale rule taking effect.

I ran a trial run with my 2011 Tax Cut software and it totally offset the gains from the proposed sale with the carry over losses and there was no increase in taxes for the year.

I realize that the $50,000 carry over losses would cover many $3,000 yearly Capital Gains losses.


I'm not sure whether you mis-typed or don't understand how the carryover works. It's first applied to any realized gains during the year, then $3,000 is applied to ordinary income such as your IRA distribution.

Doing this sale will enable me to reset my cost basis, many of which are in $55-65 range.

And I would be able to take advantage of the current 15% tax rate rather than the 23.8%.


??? If you wipe out the gain with the carryover there is no tax rate to apply. (I also don't know where you got the 23.8% rate, which is nowhere in current or January 1 tax law.)

I don't see a reason for the rush. Whether you sell now or somewhere down the road, the carryover is going to wipe out most, if not all, of the gain, so it's irrelevant what the rate is when you sell. In addition, you're using that carryover to wipe out $3,000 of ordinary income, which is never going to be taxed at a lower rate than LTCG's. If you die before using up the carryover it dies with you, but that's irrelevant too since your heirs would inherit with a stepped-up basis.

Phil
Rule Your Retirement Home Fool
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You have a zero tax rate on capital gains until the $50,000 loss is used. Except for the $3,000 a year used against regular income, it is your choice of when to use the carry forward loss.
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I currently own long term BRK-B’s with a gain, if sold of over $45,000.

I have carry over losses in my taxable account of about $50,000. (from a loss in another stock going way back.)

I am pretty certain that my Brokerage company will do a sale from my account of all my BRKB shares and simply transfer them back to my account at the price sold. ( I know I have had them sell shares in my IRA account and transfer them into my taxable account at the price at time of sale. That is what I do when taking my MRD each year.)

Why are you doing this? You don't have to sell the shares in your IRA and repurchase them in your taxable account. Simply move the shares. Their value at the time of the transfer is the amount of your IRA distribution and your basis in the taxable account, and your holding period begins on the date of transfer.

Yes, I misspoke. For the IRA MRD transfer, I simply called Fidelity, and they transferred the shares at the closing price that day. I also called them today and find they cannot transfer the brokerage shares in my taxable account at the closing price. The shares would need to be sold and then bought back.

All my BRKB shares are showing a capital gain so there will be no problem of the Wash Sale rule taking effect.

I ran a trial run with my 2011 Tax Cut software and it totally offset the gains from the proposed sale with the carry over losses and there was no increase in taxes for the year.

I realize that the $50,000 carry over losses would cover many $3,000 yearly Capital Gains losses.

I'm not sure whether you mis-typed or don't understand how the carryover works. It's first applied to any realized gains during the year, then $3,000 is applied to ordinary income such as your IRA distribution.

Yes I realize that the carryover losses first apply to gains and then $3,000 to ordinary income.

Doing this sale will enable me to reset my cost basis, many of which are in $55-65 range.

And I would be able to take advantage of the current 15% tax rate rather than the 23.8%.


??? If you wipe out the gain with the carryover there is no tax rate to apply. (I also don't know where you got the 23.8% rate, which is nowhere in current or January 1 tax law.)

I think I was adding in the 3.8% for the Obama care.

I don't see a reason for the rush. Whether you sell now or somewhere down the road, the carryover is going to wipe out most, if not all, of the gain, so it's irrelevant what the rate is when you sell. In addition, you're using that carryover to wipe out $3,000 of ordinary income, which is never going to be taxed at a lower rate than LTCG's. If you die before using up the carryover it dies with you, but that's irrelevant too since your heirs would inherit with a stepped-up basis.

Phil
Rule Your Retirement Home Fool

After sorting this out a little, and finding that I can't in effect, sell the share to myself at the same price but would need to place a limit order, I agree, "There is not reason for the rush."
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You have a zero tax rate on capital gains until the $50,000 loss is used. Except for the $3,000 a year used against regular income, it is your choice of when to use the carry forward loss.

Thanks vkg,

As I noted in mt response to Phil, I plan to sit on the $50,000 carry over losses. I was thinking that by establishing a new cost basis at time of sale, I would protect my gains in Berkshire for many years to come. Dreamer that I am.

Thanks to all,
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I think I was adding in the 3.8% for the Obama care.

That applies only to net investment income above $250K for married, $200K for others.

Phil
Rule Your Retirement Home Fool
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