Tax-loss selling

[wknecht]

Tax-loss selling is something I haven't consciously taken advantage of in the past. I plan to pay attention and be opportunistic this December. With the market continuing to boom along, I imagine there are some gains needing offset.

 

There are quite a few papers and resources out there, so I'm studying up. But any advice for a newbie or particularly illustrative/typical case studies?

[DTEJD1997]

I have heard that stocks that are down for the year are a good place to start.

 

Investors are reviewing their portfolio and are looking to get rid of dogs.

 

So maybe start looking at 52 week low lists in October November.  Check things up, and start getting a list of potential candidates.

 

Come December, have your candidates selected and buy them if the suddenly go down for no explained reason (tax loss selling?).

 

I have a couple of candidates in mind....BODY is a possible one.  Gold miners are another.

 

Good luck to you!

[ERICOPOLY]

The folks who shorted TSLA could be doing tax-loss buying.

[bobp]

I believe in a January effect, although it could be more of a December effect and I think it occurs in micro or small cap stocks. This is without any statistical evidence, just my experience. I think especially in a year like this people have a lot of profits and a potentially large tax bill in April. In Sept or Oct. losses stand out and people start to think "what am I long this sh#%$ for", and they take the loss. Stocks that are near lows now may bounce in December or Nov. - there's nothing special about January.

 

Finviz has screeners you can set up to look for stocks x percent from their 52 week lows or x percent off off their highs. You can screen for price/cash, book value or apply whatever criteria you want.

I think many here have too high standards for this but I like to take a shot on these towards the end of the year.

[hyten1]

folks i was wondering if someone knows this

 

i have some puts that i sold in MBI, its currently under water, so for tax loss purposes I was thinking of buying it back (with a loss to off set my gains) and immediately sell puts again.

 

now does the wash rule or any other rule come in to play that prevent me from taking the tax loss?

[ERICOPOLY]

folks i was wondering if someone knows this

 

i have some puts that i sold in MBI, its currently under water, so for tax loss purposes I was thinking of buying it back (with a loss to off set my gains) and immediately sell puts again.

 

now does the wash rule or any other rule come in to play that prevent me from taking the tax loss?

 

I'm not a tax expert but here is something that might be relevant:

 

http://www.tradelogsoftware.com/trader-taxes/wash-sales/when-short-selling-stocks

 

Therefore, if you cover, or buy back, your short sale shares at a loss and then sell short the same stock again within the 30 day period, you have a wash sale, and the loss becomes part of your future cost basis when you finally cover the short. This is a bit different in the sense that a sale has triggered the wash sale rather than a purchase.

 

 

It seems reasonable that when short-selling a put (your scenario), the same logic would apply.

[Uccmal]

I might be looking at some tax loss buying. 

 

In the past I have cleared the garbage out about now, and tried to be ready to buy in mid December.  This year everything is up at the moment.  I am actually waiting to clear some positions in the start of 2014 to push taxes off a year.  Next year my income from other sources will be very low, putting me in a lower tax bracket.

[DoddDisciple]

Crazy question. Isn't tax loss selling just selling at a loss before 365.25 - 1 day? I am guessing it's calender days. Or is it the lesser of December 31st and 365.25?

[Guest 50centdollars]

Crazy question. Isn't tax loss selling just selling at a loss before 365.25 - 1 day? I am guessing it's calender days. Or is it the lesser of December 31st and 365.25?

 

You have to settle your trade before year end. For example, this year, you would have to sell your CDN stock no later than Dec. 24th and US stocks must be sold by december 26th. Your trade must settle before Dec. 31st

 

cheers

[DoddDisciple]

Thanks. That's what I thought. It seems odd that would still be a requirement. All that does it make things like the December/January effect more prevalent. You would think if you hold a stock for a day less than a calender year, that would be short term, and if more than a calender year, that would be long term. The technology to calculate something like this should be there.

 

Okay, I think I've talked myself into confusion. Long term gains operate under 365 and more calender days right. Like, I can't buy in October 2013, sell in May 2014 and say that's long term.

[nodnub]

Thanks. That's what I thought. It seems odd that would still be a requirement. All that does it make things like the December/January effect more prevalent. You would think if you hold a stock for a day less than a calender year, that would be short term, and if more than a calender year, that would be long term. The technology to calculate something like this should be there.

 

Okay, I think I've talked myself into confusion. Long term gains operate under 365 and more calender days right. Like, I can't buy in October 2013, sell in May 2014 and say that's long term.

 

You are getting a few separate issues mixed up. This is about tax loss selling/buying.

http://business.financialpost.com/2012/12/14/tis-the-season-for-tax-loss-selling-and-buying/

 

Some investors decide to cull their losers before year-end if they have had a lot of capital gains already this year that they want to offset.  Therefore, this time of year can provide buying opportunities in companies with already beat-down share prices.

 

This has nothing to do with short-term vs. long-term capital gains rates (which is specific to the USA) and which operate on the basis of transaction date + 365 (and have nothing to do with the calendar year-end Dec 31st)