Basic Capital Gain Planning

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  • #1843
    DABU1989
    Participant

    Dear All,

    Happy Holidays to you and your family.

    I was reading an article posted on this website by Kaye Thomas on Basic Capital Gain Planning. It helped me to understand capital gain planning. Thank you Kaye Thomas.

    We have long-term capital gains in 2018 due to corporate actions. This could be offset (long-term capital gains) by selling some securities (capital losses) in our portfolio before Dec.31, 2018.

    Based on the article, I am thinking of not selling any securities in the tax year 2018 instead take capital losses in the tax year 2019. Is my approach correct? Please provide your comments and suggestions. Have a good weekend. With regards, Dabu1989.

    #1845
    Kaye Thomas
    Moderator

    It appears you anticipate a greater tax benefit from taking the losses in 2019. That’s possible given that losses taken this year will offset long-term capital gains that would otherwise be taxed at favorable rates. Perhaps next year they’ll offset ordinary income (but only up to $3,000) or short-term gains that would be taxed at higher rates. Then again, if the losses are large enough that it will be difficult to use them up next year or within a few carryover years because of the $3,000 capital loss limitation, you could be better off using them against this year’s long-term capital gain rather than having them remain unused for an extended time. So, the answer depends on the dollar amounts involved and what you’re anticipating in future tax returns.

    #1850
    DABU1989
    Participant

    Dear Kaye Thomas,

    Thanks for your reply. I really appreciate it.

    We have long-term capital gains of $5,000 (approx.) in 2018 and planning to take capital loss of $3,000 (approx.) in 2019 and will offset our ordinary income. Your article helped us with our tax planning. Otherwise, we would have taken long-term capital gains and capital losses in the same year. I will consider your suggestion. With regards, Dabu1989.

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