Doron F. Eghbali Business Law Blog on Lawyers.com

Dump Losing Stocks and Take Losses

Saturday, December 5, 2009 by Doron F. Eghbali

One smart tax move would be to dump the stocks, bonds and mutual bond shares you bought more expensive than what they are worth now and take losses against capital gains. This tax move is referred to as tax-loss harvesting. 

In other words, tax-loss harvesting allows you to deduct your capital losses against your capital gains dollar for dollar.

Even if your capital losses exceed your capital gains in a year, you are allowed to apply capital losses against your ordinary income and salary up to $3,000 in a given year. The remainder of the capital loss can then be carried forward to future years.

However, be careful for a "wash-sale" rule. The IRS defines wash sale as when you sell or trade stocks or securities at a loss and then buy the same stock or securities or "substantially identical" within 30 days of sale. The result is if you violate the rule, you cannot deduct the loss.

Posted at 10:53 AM
Topic: Business Law
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