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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (19826)10/11/2004 11:11:12 AM
From: E_K_S  Read Replies (2) of 78748
 
Hi Paul - What's your strategy on tax loss selling?

The value investor tends to be a long term holder and really should not be concerned with managing taxes. However, I have found that using the 31 day rule and selling a stock that I have acquired in the previous year (to establish a short term loss), there are times where it makes sence to do the sale.

I try to complete these tax loss sales no latter than October 25 because I can usually establish the same position in 31 days and still participate in an end of the year rally.

Tax loss sales that deal with long term losses are less attractive to me, since they can only off set long term capital gains. These tax rates are already quite low so generally if I am going to sell such a position, I do not get back in.

I sold a few shares of MRK today that I acquired in 11-03(at around $41) with the idea of buying them back in 31 days to lower my cost basis. I think the real money will be made on this stock when it trades next year in the low $20's. It's no guarantee that it will trade there so using this "tax loss" approach should allow me to capitalize on the recent negative trend regarding their Vioxx product. The risk is that the stock must trade near it's current lows for the next 31 days.

EKS
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