Capital loss and wash sale question

[tenant13]

Let's say I have a brokerage account with two different equities: X that was bought 6 months ago for 100k and lost 30k in the last 3 months (which would be short term capital loss of 30k) and Y that was bought 10 years ago for 100k and gained 100k long term capital gain of 100k (way higher 3 months prior but that's gone for now)). If I sell entire X position I can claim that 30k against selling 60k worth of Y and have zero tax liability, right? It would be 30k base price and 30k LTG offset by the loss. No income.

So according to the wash sale rule I'm not allowed to buy X (or anything substantially similar) back for another 30 days. But what If I buy 60k worth of Y right away? Y was not sold at a loss. That would effectively convert my 30k gain on Y into Y base - tax free. And I believe that Y will bounce back as soon as we're out of this corona mess so I essentially want to hold on to it. Am I thinking about this correctly?

I'm just trying to figure out if I can convert my losses into an opportunity. This was one of my ideas. The other would be to use 3k yearly write offs for ROTH conversions or generally adjusting income downwards in case I want to manipulate my ACA premiums.

 

[pb4uski]

Yes, you got it. You can use STCL to offset LTCG and rebuy the gain piece.

 

[SecondCor521]

Yes, you got it. You can use STCL to offset LTCG and rebuy the gain piece.

+1

Personally I would give some thought to trying to arrange the quantity of Y sold to result in a $3K capital loss left over from the sale of X. It's always made more sense to me to use capital losses to offset ordinary income rather than capital gains - more bang for the buck since OI tax rates are higher than CG tax rates.

Of course, it would depend on your overall tax situation now and in the future, as well as your goals and plans, and the future performance of Y. But something to think about.

 

[tenant13]

+1

Personally I would give some thought to trying to arrange the quantity of Y sold to result in a $3K capital loss left over from the sale of X. It's always made more sense to me to use capital losses to offset ordinary income rather than capital gains - more bang for the buck since OI tax rates are higher than CG tax rates.

Of course, it would depend on your overall tax situation now and in the future, as well as your goals and plans, and the future performance of Y. But something to think about.

That's definitely on my mind. And having 3k tax buffer for the next 10 years is not something to be dismissed.

 

[RunningBum]

That's definitely on my mind. And having 3k tax buffer for the next 10 years is not something to be dismissed.

I needed that last year to get an ACA subsidy. In the past it gave me 3K extra for Roth conversions.

 

[Time2]

I'm sorry to say, I have been writing of $3,000 every year since 2001.
No earned income now, retired, settled the last $23k on 2019 taxes.

 

[ESRwannabe]

I'm sorry to say, I have been writing of $3,000 every year since 2001.
No earned income now, retired, settled the last $23k on 2019 taxes.

IMHO tax loss harvesting combined with tax rates on qualified dividends and capital gains make taxable investing preferable to 401k (other than the free match). Roth IRA or Roth 401k on the other hand are the best of all.

I've got a capital loss of around -86k so far. I could get back to pre-coronavirus market values in another week or two if we keep going up like we have been.

My portfolio has much better growth stats than what I had going into this. I have theoretically improved my future dividend growth by a good amount. I'm feeling confident that I will come out of this better off than I was going into it.