Thursday, July 12, 2007

New Use for Zecco: Selling at a Loss

My first stock has tanked since I bought it. I'm not really sure why, though there are a couple of possibilities. I still remain optimistic for the long run.

But it strikes me that it might make some sense to sell the stock at a loss right now, and then turn around and buy it again. This would cement my losses on my tax returns, but have no other effect on my bottom line.

Short term tax gains and losses are taxed at my marginal rate (33%), whereas long term gains are taxed at the capital gains rate (15%). Thus if I sell at a loss, I can deduct a higher percentage from my income, then if I waited and sold at a loss after a year.

With Zecco being so cheap to buy and sell, the transaction would cost me very little, yet result in favorable tax treatment.


Anonymous said...

Deducting capital losses against ordinary income is capped at $3000 for a married couple (though losses carry over from year to year) so it's probably a good idea. Capital losses must first be offset by any capital gains.

As for buying it again you need to follow the wash sale rule, you cannot deduct the loss if you buy back the stock within 30 days of the sale. So just make sure you wait 31 days before you buy NVS back and you should be fine.

Alex said...

Oh, I didnt realize about the wash rule. The $3000 I knew about, and you can roll money over to subsequent years.


Interest stuff