Careful Year-End Handling of Individuals’ Capital Gains and Losses Can Save Taxes

Additionally, a taxpayer who believes there is a good chance that an investment, with a paper loss, will increase in value before it could be repurchased without violating the wash sale rules, should consider whether the benefit of selling the investment at a loss is worth the risk of losing the expected gain. However, it may be possible for a taxpayer to preserve an investment position while realizing a tax loss by 1) buying more of the same securities, and selling the original holding 31 days later; or 2) selling the original holding and buying similar securities in different companies in the same line of business that the taxpayer expects would rise or fall in value in line with the original securities that individual held. In the case of mutual fund shares, a taxpayer could sell the original holding and buy shares in another mutual fund that uses a similar investment strategy, e.g., a mutual fund run by a different company.

Taxpayers should consult with a personal tax advisor or CPA before applying these or other tax strategies.

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