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- Joined
- Jun 25, 2005
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I am mulling over an idea expressed on Bogleheads to convert dividends to capital gains that are then offset by carryover losses. This reduces taxable income.
Let's see if I can explain it correctly.
First, one has to have carryover losses.
Second, one sells shares that are about to pay a big dividend (say near year-end) at with a capital gain. That would be before the ex-Dividend date.
Third, the cap gain includes the effect of still having the upcoming dividend embedded in the share price, but since your realized gain will be offset by carryover losses, you have no income from this.
Fourth, you buy the shares back after it goes ex-Dividend.
I'm just wondering if this is worth it. It does seem that it is more worth it for shares that you have held short-term with only a slight gain in order to avoid taxes on dividends.
Let's see if I can explain it correctly.
First, one has to have carryover losses.
Second, one sells shares that are about to pay a big dividend (say near year-end) at with a capital gain. That would be before the ex-Dividend date.
Third, the cap gain includes the effect of still having the upcoming dividend embedded in the share price, but since your realized gain will be offset by carryover losses, you have no income from this.
Fourth, you buy the shares back after it goes ex-Dividend.
I'm just wondering if this is worth it. It does seem that it is more worth it for shares that you have held short-term with only a slight gain in order to avoid taxes on dividends.