TLH Question to Offset Gains From Another Sale

[BergLust]

Hello. Question for the forum. The majority of my holdings in my individual account are in ETF's (domestic VTI & international VEU) along with some other individual stocks. This year, some stock options I was granted last year, will go to a long term capital gain structure and I was intending to sell those and DCA into my long term strategy ETF's. Now, I also have a mutual fund, FUSVX (which I have had for some time) that is in the red as of the recent drop in the overall market. Is there any disadvantage to sell an equal value of FUSVX to be capital gain neutral, and use that money to re-buy into my ETF's?

[Animorph]

That's a decent plan. FUSVX is S&P 500 only, whereas VTI is total US (about 80% S&P 500 I think), so they're a little different. I wouldn't necessarily sell an "equal value", but rather an amount that gives you a tax loss that matches your stock option gains. And make sure you don't have any buys of FUSVX 30 days before or after your sale for a loss. Otherwise your loss may be disallowed (not necessarily permanently) as a wash sale.

I am of course assuming all funds are in taxable accounts.

[BergLust]

Quote:

Originally Posted by Animorph That's a decent plan. FUSVX is S&P 500 only, whereas VTI is total US (about 80% S&P 500 I think), so they're a little different. I wouldn't necessarily sell an "equal value", but rather an amount that gives you a tax loss that matches your stock option gains. And make sure you don't have any buys of FUSVX 30 days before or after your sale for a loss. Otherwise your loss may be disallowed (not necessarily permanently) as a wash sale. I am of course assuming all funds are in taxable accounts.

Hi Animorph. Yes, they are both in the same taxable account. Right on the fact of selling an amount that matches the gains. Much better said. I definitely don't plan to buy FUSVX again.

Thanks for your input. Appreciate it!

[BergLust]

One more thought. There should be a dividend payment at the beginning of October for FUSVX, which is also when my company stock will move to a long term holding. The dividend would be somewhere in the neighborhood of $800. Is there any value in holding off the sale of FUSVX until after I receive the dividend?...other than the obvious value of $800 from dividends. Or possible negatives?...other than the uncertainty of the market changes?

[MichaelB]

Quote:

Originally Posted by BergLust One more thought. There should be a dividend payment at the beginning of October, which is when my company stock will move to a long term holding. The dividend would be somewhere in the neighborhood of $800. Is there any value in holding off the sale until that point...other than the obvious value of $800 from dividends. Or negatives, other than the uncertainty of the market changes?

Does the stock option agreement state that you will receive dividends for the options?

[BergLust]

Quote:

Originally Posted by MichaelB Does the stock option agreement state that you will receive dividends for the options?

Hi Michael. I should have been more clear. I edited my comment, but I have also pasted it below. I meant wait to sell FUSVX to get the dividend...rather than sell it now. Make sense now?

One more thought. There should be a dividend payment at the beginning of October for FUSVX, which is also when my company stock will move to a long term holding. The dividend would be somewhere in the neighborhood of $800. Is there any value in holding off the sale of FUSVX until after I receive the dividend?...other than the obvious value of $800 from dividends. Or possible negatives?...other than the uncertainty of the market changes?

[Animorph]

Quote:

Originally Posted by BergLust One more thought. There should be a dividend payment at the beginning of October, which is when my company stock will move to a long term holding. The dividend would be somewhere in the neighborhood of $800. Is there any value in holding off the sale until that point...other than the obvious value of $800 from dividends. Or negatives, other than the uncertainty of the market changes?

In general the dividends will come right off the share price, so you should get the same value no matter when you sell. No dividend magic there. However, getting the dividends will mean you'll be paying taxes on them. If they are qualified you might be paying 0% or 15% for dividends or capital gains. If they are not qualified you may be paying ordinary income tax rates on the dividends, which could be higher than 15%. So it may not matter a whole lot, but check for yourself.

On the other hand, you don't want to pick up VTI or whatever just before a dividend payment and have to pay taxes before you even get started. That's usually the more critical timing concern, "buying a dividend".

[BergLust]

Thanks for that. That is one of the many reasons I appreciate this forum...and you taking the time to reply!