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Moving and changing your portfolio
Old 08-03-2013, 05:28 PM   #1
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Moving and changing your portfolio

Am I understanding this correctly? Real case scenario. If I incurred a loss of $120,000 in a portfolio, and I have another portfolio held at another brokerage firm, and it shows a gain of $100,000 from my original cost basis.

And I want to liquidate the portfolio with the gain, as it is all individual stocks that I want to get rid of and change those individual stocks and be able to buy index funds (and move to Vanguard), it will trigger a gain of $100,000 for me for the year. Yet my loses of $120,000 on the books (carried over) can not offset this $100,000 gain. I can only offset the $3,000 of that gain per year. Is that correct?

Is the $3,000 just reducing my paper gain down to $97,000? If this is correct, than what would be the best way to accomplish my goal of changing the nature of my portfolio as well as moving it?
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Old 08-03-2013, 05:42 PM   #2
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In order to offset the gain with the loss, you have to "realize" the loss. Yes, you have to sell the losers too.

If starting over, why can't you sell everything? If you think the losers will climb back up, you can buy back after 1 month to prevent violation of "wash sale" rule.

Finally, you may be able to make use of the 0% tax for long-term cap gains for people with income in the 15% bracket. For myself, as I stopped working last year, my joint filing status along with my standard deduction allowed me to realize more than $50K of cap gain with $0 tax paid.

PS. If the losers are climbing back up now and you are afraid that you will miss out during that 1-month wash sale wait, you can wait to sell them towards the end of the year. As long as the gains and losses are realized in the same calendar year, you are OK. If that sounds like market timing, well I am a self-admitted market timer, and I am not ashamed to say it.
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Old 08-03-2013, 05:49 PM   #3
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If you sell both portfolio you'll have a 20K capital gain loss. That can be used to eliminate 20K of capital gains (long or short) in future years OR reduce your ordinary income by $3,000/year for the next 6 or so years.
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Old 08-03-2013, 06:05 PM   #4
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Nope, your carryover loss of $120,000 on your last year's tax return can be used to offset any capital gains you realize this year or in the future ... until the $120,000 loss is used up.

There is no $3,000 limit when used to offset capital gains. The $3,000 limit only applies to offseting ordinary income (i.e. not capital gains).
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Old 08-03-2013, 06:08 PM   #5
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Damn! I did not read the OP correctly.

The losses were from the past. And of course they will offset the future gains entirely as LOL said.

I have often seen people not reading and understanding a post correctly. I have just committed the same sin. Sorry!
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Old 08-03-2013, 07:02 PM   #6
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I had assumed that was how it worked, but came across an article talking about losses and the $3,000 rule, and then kept looking at other articles that seemed to mirror the first. Then I finally found another article that was more specific.
Suffered a little panic there for a minute or two.
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Old 08-03-2013, 08:25 PM   #7
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Quote:
Originally Posted by NW-Bound View Post
Damn! I did not read the OP correctly.

The losses were from the past. And of course they will offset the future gains entirely as LOL said.

I have often seen people not reading and understanding a post correctly. I have just committed the same sin. Sorry!
Don't take the blame the OP was not clear. He could still be talking about unrealized gains in his portfolio. He needs to make that clear before anyone gives advice.
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Old 08-03-2013, 11:12 PM   #8
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Yes, I am talking about unrealized gains in one portfolio that I would like to sell. The losses I incurred were from 2008 from another portfolio that was managed by an advisor with 4 companies going bankrupt, so those stocks are gone, Fene. Gone forever, never coming back.
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Old 08-04-2013, 07:39 AM   #9
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So you had a $120k loss carryforward at one time. A loss carryforward can be offset against future capital gains or be used to reduce up to $3k of ordinary income each year.

So if you now sell the other holdings and realize a $100k gain, you can use $100k of the loss carryforward and your net gain for the year will be zero and you'll still have $20k loss carryforward that can be offset against future gains or future ordinary income (subject to the $3k/year limit)/.
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