I put $150k from the sale of my condo into 4 stocks that were at the top of my conviction list.
After going up $176k, I suffered an miserable last 3 months and now it is valued at $80k. I sold out to wait for a while, but have learned a big lesson.
Anyway, if I cashed out 5/9 of this year, it is my understanding that I need to wait until 6/9 to buy back in, which is what I plan to do. Is this correct?
And. . …if my stock still stays below my original deposit value, $150k, I can write the loss off at the end of the year, and that will reduce my total income for the year, correct?
Am I missing anything? First in first out, yada yada, which I know nothing about.
Sincerely,
MoneySlob
(don’t know, how sincere can one be with name like MoneySlob)
To avoid a wash sale and realize the loss, it is necessary to wait 30 days after the day of the sale.
You can buy back anytime but buying back to soon means the loss would be a wash sale and the loss is transferred to newly purchased shares. As long the new purchase doesn’t trigger a wash sale, the loss is realized and value at the end of the year of new stock doesn’t matter.
What you are missing is that capital losses can offset any amount of capital gains in a tax year but ONLY $3,000 of the loss can be taken each year against regular income. The capital loss not used is carried forward until used or death.
And, it’s only a wash sale if you buy back the same four companies. You could purchase one of their competitors, or an industry ETF/mutual fund, without triggering the wash sale.
I buy same stock maybe and realize whatever gains happen and only get taxed when I sell(less if over a year).
For the initial loss, I get a deduction at tax time for the loss. This reduces my annual earnings. My broker Charles Slob sends me all the forms to file.
Correct?
There is no FIFO because I initially cashed out everything all at once.
I buy same stock maybe and realize whatever gains happen and only get taxed when I sell(less if over a year).
Gains are realized on sale. Gains are taxed when realize.
For the initial loss, I get a deduction at tax time for the loss. This reduces my annual earnings. My broker Charles Slob sends me all the forms to file.
Correct?
Partially true. Any amount of realized capital losses can be used against realized capital gains.
Only $3,000 of capital loss can be taken against other income in any tax year. The balance of realized capital loss is carried forward until it offsets realized capital gains or is used by the $3,000 annual amount allowed against other income.
There is no FIFO because I initially cashed out everything all at once.
If you didn’t specify specific lots of stock at the time of sale then the default is first in/first sold.
How certain is that? My understanding is that there is nothing forcing your broker to follow any particular rule in choosing which shares are sold if (a) you sell only some of your shares of a company, retaining ownership of other, and (b) you do not specify which lots to sell.
(I confess I haven’t paid as much attention to this as I might as all my investments are within IRA and ROTH accounts.)
How certain is that? My understanding is that there is nothing forcing your broker to follow any particular rule in choosing which shares are sold if (a) you sell only some of your shares of a company, retaining ownership of other, and (b) you do not specify which lots to sell.
The broker’s default is normally FIFO, but I think most brokers allow the customers to control it at settings, e.g., to highest or lowest cost basis first.