RE: Any thoughts on which losses to offset first?
Keep in mind these two points:
1) You are limited to a $3,000 net loss per year, and you can carry over losses into future years. You can, of course, combine losses and gains, but whatever the result, you are limited to $3,000 loss per year. Thus, the tax benefit for any loss greater than $3K will not be realized until the next year. Time is money, etc.
2) As to picking which stock to sell, I don't believe you can reduce that decision to a simple mathematical choice, whereby the bigger loser is selected. The way I see it, there are two reasons to sell a losing stock. (1) You simply don't want to own the shares anymore. (2) You are in need of a tax loss.
The logic #1 is simple...if the stock is a loser, and you want out, then just sell it and take the loss.
The logic for #2 is more complex. If you need a loss, then there are a couple of strategies to consider. If you like the stock, but want to take a loss in this tax year, you can sell the shares, and then repurchase 31 days later. This will generate a loss, but assure your participation in future gains. Or, if you are nervous about being out of the stock for 31 days, you can double up on the shares, and then sell the loser shares 31 days later. (Can't do this for 1998 anymore!) Another method would be to sell the shares and immediately purchase shares in a "cousin" stock. (i.e Lucent vs. Cisco; Dell vs. Compaq) This way, you maintain a position in the industry, but enjoy the tax loss.
Hope this helps
Bill S |
