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First, let me apologize for just jumping in like this. Haven't reviewed any of the posts in this group to see if a similar question has already been answered.

I read TMF Investment Guide and had a question about wash sales. So far this year, I have about $5K in realized short- and long-term capital losses (selling off those Wisely underperforming mutual funds).

Now, I don't typically itemize my deductions and I'm in the 28% tax bracket, so do I still get to use $3K in capital losses to offset normal income this year even if I take the standard deduction and don't itemize?

If I can use the $3K without itemizing, that would leave me $2K in capital losses to carry forward next year, right? What I'm trying to decide is whether to realize some short-term gains this year to raise my cost basis in some of my positions.

I know the I.R.S. frowns on wash sales to try and "fake" capital losses, but are you allowed to buy the same security back (thereby raising your cost basis) within thirty days if you're doing it to realize capital gains instead?

These are stocks that I'm planning on holding for the long term, so the only motivation I would have for selling them would be to buy them back to raise my cost basis. I don't want to be out of the positions for 30 days. I realize this "buyback" entails an extra cost in commisions/spread.

Any comments or advice would be appreciated.

Thanks in advance,
alooFFool
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Sorry, but a couple of clarifications:

"I read TMF Investment [Tax] Guide . . ."

and

". . . $2K in capital losses to carry forward next year, right? What I'm trying to decide is whether to realize [about $2K of] short-term gains this year to [offset the losses and] raise my cost basis in some of my positions [or should I just carry these capital losses forward]."

alooFFool
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You are correct in that you can take 3000 of the 5000 loss in the current year against other income. I do not think it would be a good idea to sell a stock just to take a gain to offset your remaining 2000 loss. You can carry over the loss to next year when it will save you some tax. If you sell and rebuy you will not get the benefit of the higher until cost basis you sell it again. You can do it if you want to , the wash rules only apply to losses.
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[[First, let me apologize for just jumping in like this. Haven't reviewed any of the
posts in this group to see if a similar question has already been answered.]]

No apologies necessary. But you might want to become a bit more familar with the Taxes FAQ area. There is a lot of tax information there that may be of use to you in the future for many of your tax questions. You might want to check it out.

[[ I read TMF Investment Guide and had a question about wash sales.]]

Thanks for buying the book. I hope that you enjoyed it, and more importantly, found some solid tax saving techniques.

[[ So far this
year, I have about $5K in realized short- and long-term capital losses (selling off
those Wisely underperforming mutual funds).]]

Sorry to hear about your losses, but glad to hear that you are dumpin' those overpriced, underperforming mutual funds. Welcome to the party!!!

[[ Now, I don't typically itemize my deductions and I'm in the 28% tax bracket, so
do I still get to use $3K in capital losses to offset normal income this year even if
I take the standard deduction and don't itemize?]]

Yup...you sure do. Your capital losses will be computed on Sch D, and the allowable loss ($3k max) will flow directly to the front of your Form 1040. And this is true regardless of if you itemize your deductions or not.

[[ If I can use the $3K without itemizing,]]

And...you can...

[[ that would leave me $2K in capital losses
to carry forward next year, right? ]]

Correctamundo...

[[What I'm trying to decide is whether to realize
some short-term gains this year to raise my cost basis in some of my positions.]]

Something that you might want to do...certainly. But remember that while you are raising your cost basis, your holding period starts all over again from the new purchase. And remember that long term capital gains get preferred tax treatment.

So if you have current gainers that are now short term, you can certainly sell 'em off, take advantage of the short term loss, and make a repurchase and then hold long term. That is not a bad strategy as long as it makes SENSE to you and for your portfolio.

[[ I know the I.R.S. frowns on wash sales to try and "fake" capital losses, but are
you allowed to buy the same security back (thereby raising your cost basis)
within thirty days if you're doing it to realize capital gains instead?]]

Yup...the was sale rules only apply to sales made at a LOSS. Uncle Sammy doesn't care what you do with the money that you receive from a sale on which you make a gain. You can take your "gain" money, turn right around and buy that stock right back without fear of the wash sale rules.

[[ These are stocks that I'm planning on holding for the long term, so the only
motivation I would have for selling them would be to buy them back to raise my
cost basis. I don't want to be out of the positions for 30 days. I realize this
"buyback" entails an extra cost in commisions/spread.]]

No problem. You could buy them back immediately.

[[ Any comments or advice would be appreciated.]]

All of my comments are above. I hope that hey help you to clarify your issues.

[[ Thanks in advance,]]

You are very welcome...
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