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I forgot the timing
Old 07-25-2015, 08:05 AM   #1
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I forgot the timing

If I sell some after tax stock investments to take advantage of capital loss on my income tax then how long do I have to wait to buy it back? I was thinking that I could sell while it is less than what I paid and buy it back as soon as possible (the next day if allowed) so I could have the tax advantage and not lose any shares.

Cheers!
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Old 07-25-2015, 08:08 AM   #2
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Quote:
Originally Posted by Badger View Post
If I sell some after tax stock investments to take advantage of capital loss on my income tax then how long do I have to wait to buy it back? I was thinking that I could sell while it is less than what I paid and buy it back as soon as possible (the next day if allowed) so I could have the tax advantage and not lose any shares.

Cheers!
You have to wait 31 days.
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Old 07-25-2015, 10:36 AM   #3
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I figured it was something like that. The worst that can happen is that it would go up a little before then. It's an oil company so I don't think so but if it does it shouldn't be much. The best that can happen after I sell is if it goes down some more so I can buy more shares with the same money.

Thanks,
Cheers!
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Old 07-25-2015, 02:29 PM   #4
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You're describing a "wash sale". You can look up the exact rules. It applies to purchases 30 days before the sale for loss as well as 30 days after.

You can purchase something like XLE, a generic oil company index ETF, or a similar oil company if you don't want to be out of the market for a month.
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Old 07-25-2015, 02:36 PM   #5
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I guess we are assuming this is all in a taxable account, but maybe it isn't?

Don't forget that a Roth IRA is after-tax and so is a non-deductible traditional IRA.
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Old 07-25-2015, 10:29 PM   #6
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The OP talked about income tax, so yes, we assume that he's talking about an after-tax account.

And while tax-deferred accounts are mentioned, the wash sale rule also applies if you sell stocks in a taxable account for tax loss harvesting, then buy the same in a Roth or Traditional IRA within 30 days to hedge.

See: http://www.irs.gov/pub/irs-drop/rr-08-05.pdf?.

Prior to this ruling, people used to dodge the wash sale rule by using a non-taxed account for the buyback.
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Old 07-26-2015, 05:01 AM   #7
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I guess we are assuming this is all in a taxable account, but maybe it isn't?

Don't forget that a Roth IRA is after-tax and so is a non-deductible traditional IRA.
Yes this is a taxable account so I will be waiting the 31 days. I invested in two oil companies so I might as well sell both while they are lower than the original purchase. It should give me a few dollars to use in the next tax season too. I don't think they will be going back to what I originally bought them for in the next 30 days.

Cheers!
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Old 07-26-2015, 05:59 AM   #8
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Yes this is a taxable account so I will be waiting the 31 days. I invested in two oil companies so I might as well sell both while they are lower than the original purchase.
Tax-loss harvesting is an important tool. But since you have losses in two different oil companies, you might try the following idea instead of going to cash for 31 days if you want to stay invested in oil companies:

1. Sell one oil company and buy shares in the other oil company. Do not sell the other oil company yet. You will have the same amount of money invested in the two oil companies before and after this "exchange", so your risk will be pretty much the same.

2. 31 days later, sell the shares of the second oil company that have a loss and buy back shares of the first oil company.

The above is a pretty standard trick for folks who do tax-loss harvesting who wish to remain in the two stocks they own. It is often used with say Pfizer and Merck or Apple and Microsoft or Ford and GM, etc.
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