Just looking for rough, conceptual thoughts / advice. Hypotheticals.

Let's say one has small holdings in Stock A purchased as some price B.

Assume that one sells some of Stock A at price C (C > B but not much) and yields a minor profit (let's say 15% subject to long term capital gains.

The price of Stock A has since decreased considerably to price D (D << B); there is no anticipation that the price will recover back to B in the near term (next 2 years).

Should one sell more of Stock A for a loss to mitigate the earlier capitals gains since there is no anticipation of break even? Especially since the Stock will likely be sold latest next year to settle debts coming due? Or is there a reason to wait until later (other than hoping for some appreciation)?

Why take an actual loss to reduce an already realized gain? Take your profit, pay your taxes. Hold the rest of the shares according your other plans.

A good test is ask yourself "Would I buy this stock today, at today's price, with the information currently available?".

So if your timeline is way out there, then 2 years is not much of a factor. Do you believe the stock will appreciate a lot after that 2 year pause. If so, is that belief based on good solid reasoning?

There is no real rational behind worrying about locking in your losses if you sell today. You have actually lost that value. So now the question is what should you do with the remaining value? Should you "buy" that stock (by holding onto it) or should you deploy it elsewhere.

Offsetting your previous gains with losses is a viable reason to sell today. You do put money in your pocket by reducing your taxes. You might do a calculation on how much you will pay in taxes if you do vs. don't sell the remaining stock at a loss.

Also consider near term future tax considerations. If you're on the cusp of Medicare, you want as low a taxable income as possible starting 2 years before you hit 65, for the IRMAA penalty. So you might be smart to sell the remaining stock if you are 63 or older. Or, what if you sold the remaining stock and used the proceeds to fund ROTH contributions? That can pay dividends in the future big time.

But the simple answer is the first question I posed, do you have a rational belief the stock will appreciate sufficiently that you would buy it today rather than put the money into something else?

Your A B C & D are too much for me. But the general procedure to offset a capital gain is to sell a stock that has a loss, then buy the same dollar-amount of a similar stock that you expect to do well.

My financial guy does that near tax time. Of course his cost of trades is much lower than that of most individual investors. And I don’t get charged a cent for such trades. They’re covered by the fee I pay him.

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Why take an actual loss to reduce an already realized gain?

So you don't have to pay the capital gains tax - I wish everything was this easy.

Assuming Konatas crystal ball is correct and stock has no chance of recovering within 2 years, and he will probably sell next year anyway, why would you hold a loser when selling it makes you money?

Thanks. The thinking was: profit yielded via the earlier sale. The rest of the holding will be liquidated next year; no appreciation expected beyond current levels.

So, perhaps it might be financially beneficial to take any losses in the same year as the profit rather than next year when there isn't any anticipation of capital gains (no capitals gains opportunity for any equity next year). But, if the equity in question does, for some inexplicable reason, appreciate next year, then perhaps it's worth holding. MAGA may work some magic?

you can buy back a loser 31 days after you sell it and still use the initial loss to offset gain in same year.

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Assuming Aglifter's crystal ball is correct and stock has no chance of recovering within 2 years, and he will probably sell next year anyway, why would you hold a loser when selling it makes you money?

Thanks guys. This is what I was believing / thinking. Just wasn't sure if it made sense because I've never sold anything at a loss before just to offset other gains. Never really been in a situation where losses were material.

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Originally posted by doublesharp:
you can buy back a loser 31 days after you sell it and still use the initial loss to offset gain in same year.

Interesting. In this case, likely just buy something else if I could I'm not financially savvy but not seeing this stock appreciate in the near term.

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Originally posted by doublesharp:

quote:

Why take an actual loss to reduce an already realized gain?

So you don't have to pay the capital gains tax - I wish everything was this easy.

Assuming Konatas crystal ball is correct and stock has no chance of recovering within 2 years, and he will probably sell next year anyway, why would you hold a loser when selling it makes you money?

I'm with ds on this.

Thanks guys. I'll start assessing a reasonable strike price; and then settle for what I can get by end of year.

You're going to have to sell it to pay debt, right? so, the downside is it could go down anyway. So, I would sell it to offset the capital gains you have. The put it in a safer investment because that's what you do with money you're going to need in a year or less.

My next three years' worth of needs are in time targeted bonds as in ladder bond etfs.

It's called tax loss harvesting. Google that and it could help you with strategies to minimize your tax liability.

Thanks guys. This is new to me. Not that it's a lot of money but every bit helps these days.

Ugh, digging a little deeper and now I need to research wash sale rules and figure out how that works. Not sure why this needs to be so complicated for simple folks like me. I get that this may be material for big traders and such. But the amounts I'm talking here is peanuts. 4 figures....

Two thoughts on this:

1. Get your tax advice from a competent tax advisor, not an internet forum.

2. Capital gains are treated separately from regular income, and there are exclusions for many taxpayers depending in their other taxable income. You may be worrying over nothing.

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Originally posted by konata88:
Ugh, digging a little deeper and now I need to research wash sale rules and figure out how that works. Not sure why this needs to be so complicated for simple folks like me. I get that this may be material for big traders and such. But the amounts I'm talking here is peanuts. 4 figures....

Here ya go:

A wash sale happens when you sell a security at a loss and buy a “substantially identical” security within 30 days before or after the sale. The wash-sale rule prevents taxpayers from deducting paper losses without significantly changing their market position.