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Long term Capital Gain and Loss - tax question
Old 09-25-2022, 10:34 AM   #1
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Long term Capital Gain and Loss - tax question

I sold out some bond funds in our taxable account earlier this year. It netted about $30k of long term capital gains. If I now sell some other mutual funds at a loss, that I have held for years, say of $10k, does that net to $20k of taxable long term capital gain? Or can I only recognize $3k of that $10k loss this year?

I believe the net to $20k, which is then claimed on our taxes, to be the case but would like confirmation.
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Old 09-25-2022, 10:46 AM   #2
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You will have a net of $20k capital gains and you will pay appropriate taxes on that amount.
This offset is done first.

The $3k only comes into play after the offset described above is done. If you would have happened to have a $5k loss after the offset, then you could have used $3k of it this year to offset income and carried over $2k for next year.

Given the current markets, I would probably be looking to sell up to $20k more in losses if I could to offset that $20k in gains. Let's say you could sell a stock fund at a $20k loss. And immediately buy something similar to what you sold, but not identical. You would still own the same amount of a comparable stock. You would also have offset all $30k of your initial gain and you would owe zero in taxes. This is a prime example of tax loss harvesting.
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Old 09-25-2022, 10:46 AM   #3
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Quote:
Originally Posted by tominboise View Post
I sold out some bond funds in our taxable account earlier this year. It netted about $30k of long term capital gains. If I now sell some other mutual funds at a loss, that I have held for years, say of $10k, does that net to $20k of taxable long term capital gain? Or can I only recognize $3k of that $10k loss this year?

I believe the net to $20k, which is then claimed on our taxes, to be the case but would like confirmation.
Yes, per Investopedia. Or run it through an online income tax calculator found at Dinkytown.net

https://www.investopedia.com/article...es-and-tax.asp
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Old 09-25-2022, 10:58 AM   #4
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The matching is
Long to long
Short to Short
Then Short to Long/Long to Short.

So if you are like me, you might have an unfortunate situation: Lot's of long term gains, some short term losses. Which is not good because those ST losses would be great to take against ordinary income, but can't unless I come up with LT losses to offset the LT gains. (Or sell things with ST Gains. Which I've been trying to do, even if it means buying them back because I want to keep them, i.e. establish a higher basis.)

Typically, the objective at year end would be either:
Long Term gain - taxed at LT Capital Gains rates
OR
Short Term loss - reduces ordinary income (up to 3K).
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Old 09-25-2022, 03:36 PM   #5
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You enter all reported capital gains and losses on Schedule D and associated forms. There is no claiming, as the calculations are by tax software or yourself.. The net gain ends up being 20,000.
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Old 09-25-2022, 03:47 PM   #6
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The $3000 that confuses everyone is if you still have losses after applying against your gains, you then can take a $3000 deduction to your current income. Any losses after that carryover into future years until exhausted.
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