Tax Harvesting / Tax Loss Selling

[retiredat48]

FIRST FIVE POSTS BELOW MOVED FROM YBB'S BARRONS THREAD TO A NEW THREAD

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I see the market as fairly normal.

Fairly normal means strong seasonal patterns exist entering and exiting Q4. That pattern is typically(posted about it often):

"Stocks have a very poor September, followed by a bottom in week 1 or 2 in October. Then stocks recover, and November and December are strong upward months. Tax loss selling ends about 20 December."

So here is the most likely market direction I see for Q4:

"Stocks have a very poor September, followed by a bottom in week 1 or 2 in October. Then stocks recover, and November and December are strong upward months. Tax loss selling ends about 20 December."

It's not rocket science.

I will be doing some repositioning shortly, and adding some monies now sitting in Money Market funds, into selected stock funds.

R48

[yogibearbull]

Tax-loss harvesting is now split.

It's OCTOBER for institutions as the funds are allowed to close books for the year so that they can timely announce yearend distributions in November/December for investors to plan. Some funds still follow the old practice of closing books in December, but then the distributions will be in the next year (2024) with taxes still due in the current year (2023).

It's DECEMBER for retail investors & the market has regular hours on the last day of trading, Friday, 12/29/23.

The last day to DOUBLE-UP & sell the old lot by the yearend is 11/28/23 in order to avoid wash-sale. With commission-free trading, this practice is less popular now. It is easily possible to sell, & simultaneously buy something SIMILAR BUT NOT IDENTICAL.

[retiredat48]

Thanks yogi...Clarification to all...when I posted that "tax loss selling ends about 20 December" I was not referring to your right to sell up to 31 December. Rather, the effects of tax loss selling are done earlier and if you are waiting to buy certain depressed assets, 20 Dec a good time.

R48

[Norbert]

retiredat48

"It's not rocket science."

That's true. Rocket science is easier than forecasting market moves.

But you may well be right with your perception of the markets as "normal", thus suggesting that seasonal patterns will prevail. We shall see.

[anitya]

Posters,

Please share your tax-loss selling experience from prior years.

E.g., Would you have sold if it is not for the tax loss? Did you end up buying at the higher price because you had to wait for the 30 day window to pass? Did you not buy because the prices ran away from you? Did you buy a replacement investment because you did not want to wait out the 30 days and the replacement investment did poorly relative to what you sold to harvest the loss?

I am starting to have doubts about the merits of universal tax-loss harvesting i.e., letting the tax tail wag the dog but wanted to see others experience before forming a firm opinion.

[anitya]

In 2022, I did take tax losses but most of my TLH sales were things that I should have exited sooner and the deadline just forced me to get my act together. If I did not have a lot of recognized gains from Jan / Feb to offset, I am not sure I would have sold some of the losers like GM. I think TLH has to be more thoughtful than using it just as a clever play - clearly not how I approached it earlier in my investment career.

[chang]

The previous posts have been moved to this new thread. (Previously in YBB's Barrons thread, where they would eventually be lost.)

Feel free to discuss tax harvesting ideas and strategies here.

[anitya]

In case anybody would be interested, a TLH post left behind in the previous thread -

big-bang-investors.proboards.com/post/41841/thread

[yogibearbull]

Thanks chang .

I do use tax-loss harvesting (TLH) regularly to offset current gains. I typically swap immediately into similar but not identical funds. I don't try this with stocks because the new stock could be a turkey too, or worse; I may swap a stock into a sector ETF temporarily. As I maintain my allocations, I do have gains and losses, not just gains as some great market timers may have. In most cases, when things bounce back, I end up paying CGs LATER. So, the TLH may only defer CG taxes, but that is fine with me. My motto - never pay a tax now that I can pay later (interestingly, less common tax-gain harvesting, when applicable, may be an exception for this; see MFO).

[mnfish]

I took a lot of CGs in 2022 and more so far in 2023. Sold all the bond funds in my taxable account at a loss to offset what I could. 2022 income resulted in paying back 60% of my MnSure/Federal health insurance tax credits but so be it. The stocks I sold are still down from where they were when I sold them and that money is now earning over 5% in a MM.
I use tax lots to pick which shares of individual shares of stocks/ETFs to sell.

[retiredat48]

1. I have been doing more CAP GAIN HARVESTING...TAX FREE. That is, I am in tax brackets where cap gains are tax free up to a limit. So I have been selling some funds to reestablish new cost basis on certain funds. Like, during Covid year, RMDs were suspended for retirees. I used this low income time to take some cap gains.

Two observations though: I have very little assets left in taxable accounts...and...if I wait till I die, a step-up in cap gains will occur to beneficiaries. So no strong urge to do cap gain harvesting.

2. In past 55 years I have only had only TWO LOSING POSITIONS. So tax LOSS harvesting not a big feature with me.

R48

[Chahta]

Sept 28, 2023 18:48:49 GMT retiredat48 said:

1. I have been doing more CAP GAIN HARVESTING...TAX FREE. That is, I am in tax brackets where cap gains are tax free up to a limit. So I have been selling some funds to reestablish new cost basis on certain funds. Like, during Covid year, RMDs were suspended for retirees. I used this low income time to take some cap gains.

Two observations though: I have very little assets left in taxable accounts...and...if I wait till I die, a step-up in cap gains will occur to beneficiaries. So no strong urge to do cap gain harvesting.

2. In past 55 years I have only had only TWO LOSING POSITIONS. So tax LOSS harvesting not a big feature with me.

R48

With "very little left in taxable accounts", where are you harvesting CGs that avoid taxes?



Regular tax payers have very few choices to reduce their taxable income. TLH is one of the few.

[yakers]

I do sell some losers sometimes in my WF trading account but not TLH by buying the same stock later or an equivalent. In my VG account I do TLH by exchanging funds, very easy to execute and easy to find a similar but not identical fund to exchange with.

[retiredat48]

Chahta , asked: "With "very little left in taxable accounts", where are you harvesting CGs that avoid taxes?"

Indeed not much going forward.  And some things I own, like Wellington Fund since 1953, I have taken some cap gains, but do not want to sell out completely as I consider I may be the longest running shareholder in this fund!!  Maybe vanguard will recognize someday!   I also own some toeholds in "closed funds", like PRWCX, in case I want to add to this fund.  Is prwcx still closed?

BTW recently got a nice set of earplugs from Fidelity for winning their "Academy Award" for "most wisdom" among heavy-duty posters.  My grandkids said that was good "dope".  Old timers may be asking what does that mean??  From google: "The slang term dope is most often used by teenagers to describe a thing, person, or event that is exceptional."  



R48

[chang]

Sept 27, 2023 22:06:17 GMT anitya said:

In case anybody would be interested, a TLH post left behind in the previous thread -

big-bang-investors.proboards.com/post/41841/thread

Missed that one ... now moved here.

[bizman]

I'm wondering about tax loss harvesting with VPU.  Given they are both utility sector ETFs, but I believe they have somewhat different holdings and/or percentages thereof, would selling VPU to XLU pass muster with the IRS?  Or should I stick to UTG or individual utilities to avoid a wash sale?  Any thoughts would be appreciated.

[yogibearbull]

bizman , VPU follows MSCI Utilities INDEX, XLU follows S&P Utilities INDEX. So, They are OK for TLH.

UTG is a utilities CEF that will add complications of premium/discount (tiny discount now).

[bizman]

Oct 17, 2023 16:43:27 GMT yogibearbull said:

bizman , VPU follows MSCI Utilities INDEX, XLU follows S&P Utilities INDEX. So, They are OK for TLH.

UTG is a utilities CEF that will add complications of premium/discount (tiny discount now).

Thanks very much, Yogi!

[habsui]

Oct 17, 2023 16:43:27 GMT yogibearbull said:

bizman , VPU follows MSCI Utilities INDEX, XLU follows S&P Utilities INDEX. So, They are OK for TLH.

UTG is a utilities CEF that will add complications of premium/discount (tiny discount now).

Respectfully, are you sure about this?

The top holdings look very similar. Or that does not matter, simply the different index matters?

[anitya]

habsui,

big-bang-investors.proboards.com/post/41789/thread

[habsui]

Oct 17, 2023 19:08:22 GMT anitya said:

habsui ,

big-bang-investors.proboards.com/post/41789/thread

How does that answer my question?  Thx. 

[yogibearbull]

habsui , not even the IRS call center can be sure about anything they say.

But if 2 funds use different underlying indexes, with different methodologies (e.g. for MSCI utes index: 25/50 capping; tiny bits of energy, techs as per M* classification; different levels of cash), then they are OK for TLH in my opinion.

[anitya]

yogibearbull, in your estimation, is most of TLH from funds (especially the Oct 31 YE funds) over by now or more of it is expected until 31st?