Another stock sale tax question

[nashvillephoto]

What is the name of your state? Tennessee

Hi. I had a rather stressful start of the year watching my Apple stock take a huge plunge. I sold it at 125 in Feb. for a $30K loss and bought it back at 119 the same month with additional shares. It is now trading in the upper 180s which exceeds the amount I lost by a good amount.

My question: Would it be best to sell some this year (and buy it back) so that the gain is balanced with the february loss and limit my tax liability for when I do cash it in during a different year? I have learned by the answers to the earlier post that my loss write off would be limited to 3k per year.

Another question: I will be using this stock to pay for a down payment on a house in the next year or so. Is there anyway to reduce cap gains tax when I sell the stock for this purpose?

Thanks for any advice you might have!What is the name of your state?

[LdiJ]

Originally Posted by nashvillephoto

What is the name of your state? Tennessee

Hi. I had a rather stressful start of the year watching my Apple stock take a huge plunge. I sold it at 125 in Feb. for a $30K loss and bought it back at 119 the same month with additional shares. It is now trading in the upper 180s which exceeds the amount I lost by a good amount.

My question: Would it be best to sell some this year (and buy it back) so that the gain is balanced with the february loss and limit my tax liability for when I do cash it in during a different year? I have learned by the answers to the earlier post that my loss write off would be limited to 3k per year.

Another question: I will be using this stock to pay for a down payment on a house in the next year or so. Is there anyway to reduce cap gains tax when I sell the stock for this purpose?

Thanks for any advice you might have!What is the name of your state?

There would definitely be a tax advantage in selling some of the stock now, to take advantage of the 30k in loss that you have available. However, the loss will still be out there in future years as well, as it carries forward until you use it up. If you feel that Apple will continue to grow, then you can wait to sell. 119 to 180 however is pretty nice growth.

[anteater]

Wouldn't the OP run into the wash sale rule?

Hi. I had a rather stressful start of the year watching my Apple stock take a huge plunge. I sold it at 125 in Feb. for a $30K loss and bought it back at 119 the same month with additional shares.

The $30K woud be added to the cost basis of the shares that the OP now holds. No?

[tranquility]

That's the way I read it. The "loss" from this wash sale is added into the basis to be realized on the eventual sale.

[LdiJ]

Originally Posted by tranquility

That's the way I read it. The "loss" from this wash sale is added into the basis to be realized on the eventual sale.

I didn't catch how quickly he bought the new shares. However, not all of the new shares that he purchased are part of a "wash". He purchased more shares than he sold. Only the number of shares that equal what he sold will be part of the wash, and only those shares will have the additional basis.

In that case, I will change my advice. Since the OP has substantial gain now on the shares, I would recommend selling the shares involved in the "wash" in 2008. Why tempt fate when the return is so substantial now?

[nashvillephoto]

Originally Posted by LdiJ

I didn't catch how quickly he bought the new shares. However, not all of the new shares that he purchased are part of a "wash". He purchased more shares than he sold. Only the number of shares that equal what he sold will be part of the wash, and only those shares will have the additional basis.

In that case, I will change my advice. Since the OP has substantial gain now on the shares, I would recommend selling the shares involved in the "wash" in 2008. Why tempt fate when the return is so substantial now?

Thanks for all the advice. I really appreciate it. I am just now learning the rules regarding the wash. It seems from the advice here the best course of action would be to sell a portion of the shares this year that would give a 30k gain to over the price paid for them in February. However, I do wish to continue holding them....will I run into trouble with the wash (or other) rules if I were to purchase those same shares back within a short period of time of making that sale?

Thanks!

[anteater]

LdiJ: I didn't catch how quickly he bought the new shares.

And I did not catch the "additional shares" part.

....that would give a 30k gain to over the price paid for them in February. ....will I run into trouble with the wash (or other) rules if I were to purchase those same shares back within a short period of time of making that sale?

The wash sale rules only apply if you have sold at a loss and then bought in again. The tax code does not like you selling to create a tax loss and then buying back almost immediately with a lower cost basis. When you have a gain, the IRS says, "Thank you. Please pay your tax and feel free to spin the wheel again."

You do realize that you would be creating short-tem gains that are not eiligible for the lower long-term capital gains rates?