have to "launder" gains?
dumbstruck
disinvesting during the crash, then progressively reinvesting during
the recovery. I now carry an astronomical amount of both capital
losses and gains this year (losses, since the year started late in my
disinvestment phase and excludes last year realized gains).
So I guess to avoid the $2000 quirk in the tax loss carryover rule, I
have to go ahead and sell everything this year all over again to
realize the gains, then reinvest again?!? Otherwise it would take more
than my lifetime to harvest those annual $2000 capital loss
allowances. Pardon me if I have this scrambled, but the fed has cut me
off from it's paper forms distribution as a perverse reward for e-
filing.
Well, I am otherwise happy wth the strategy. By the worst of the dip,
I had already disinvested and didn't have to worry about how low or
long the problem would last. And I didn't tarry at all in reinvesting,
so ended up with the same amount at the end, yet had more at the scary
low point where it mattered the most.
BreadW...@fractious.net
> So I guess to avoid the $2000 quirk in the tax loss carryover rule, I
You mean $3000.
> have to go ahead and sell everything this year all over again to
> realize the gains, then reinvest again?!? Otherwise it would take more
There's no need to do that. And, in fact, the wash-sale rule will
make it hard to do so, anyway.
Just carry the losses forward. It's no big deal. Use them as
you actually realize gains. You are limited to using $3000/yr
against *ordinary* income, but you can use as much as you need
to offset capital gains. So sell stuff when it makes sense to
sell it, not just to use up those losses.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
dumbstruck
> Just carry the losses forward. �It's no big deal. �Use them as
> you actually realize gains. �You are limited to using $3000/yr
> against *ordinary* income, but you can use as much as you need
Thanks for fielding a dumb question. Lessons learned:
1) Read the pdf of your of your e-filed tax return in terms of
inferring the latest carrots and sticks (I was remembering $2000 from
the last paper instruction book I had).
2) Better to keep a balance of capital losses than wiping it out,
because you can bleed off more highly taxed ordinary income.
3) Don't post questions from a middle of the night panic; you have a
few hours before the market closes anyway before needing any crazy
sell/buy orders.
Tad Borek
> Otherwise it would take more
> allowances.
That $3,000 deduction against other income often ends up being a better
place to "use up" loss carry-forwards, because that's offsetting
ordinary income. For most people, that results in a bigger tax benefit
than offsetting long-term capital gains (think of loss carry-forwards as
a balance sheet item...to value them highest, what's the highest
cents-per-dollar-of-loss?).
Keep in mind also that the $3k offset lowers adjusted gross income, so
can have an even greater benefit than the brackets suggest. E.g. if AGI
is lowered to the point where you qualify for some additional tax
benefit that is AGI-limited.
Another thing to think about is whether the carry-forward is large
enough to let you rethink portfolio approaches. Normally short-term
capital gains and mutual fund capital gain distributions are a hassle in
taxable accounts, they trigger tax bills. If you have some whopping
capital loss carry-forwards to cancel them out, that won't be the case.
Those carry-forwards could for example free you up to pare back an
investment that's been held for less than a year, that you don't think
will hold its gains - though "normal" tax management might suggest
waiting until a year is up.
-Tad