Short Term Capital Losses

Following Saul and folks on his board, as well as Knox Ridley, and a few others, I have holdings of “risk-on”, growth growth stocks that have fallen significantly in the last five months, and I’ve been wondering if there is a way to use the paper loss to my advantage against taxes.

My holdings of $MNDY is down ~40% since buying it, and now I’m thinking the best solution is to sell it straight away, taking the short-term capital loss that can offset short-term capital gains I hope to achieve later this year.

I like Monday and will probably buy it back in ~31 days after satisfying IRS wash sale rules. In the meantime, I am thinking of placing the money in other growth stocks. Ideally, I’d find another company that is similar to $MNDY, but that’s not so easy to do, but the money can go into any one of a handful of growth stocks that have similar price depression, while looking like long-term picks.

This strategy is based on a couple assumptions: (1) growth stocks are compressed in value and will spring upward soon; (2) other growth stocks can be purchased that will have somewhat similar price action as Monday for the 31 days needed.

– Paul

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Hi Paul -

Capital losses can be netted against capital gains taken within the same year. If your capital losses exceed your capital gains for the year, up to $3,000 of the loss can be used to offset ordinary income. Any additional capital losses are carried forward to the next year.

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