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I was in an employee stock purchase program that auto-bought stock every two weeks at a 15% discount as part of a paycheck deduction. This was BEFORE the 2008 crash and during and after it. This stock started at, say, 100, and was being bought every two weeks for a two year period. It would go to 90, 80, 70, 60, down to 10 for several paycheck periods, then back up to 20, bought for those types of fluctuated prices, and now it's up to 20 and stayed this way for years. I'm giving you a rough idea of how it fluctuated over two years because I'd like some advice on how best to sell it and report the sales to the IRS. I have a spreadsheet of the number shares, the date bought and the price paid. Now I want to start selling it.

For example, one option is to sell some of the stocks once a year for the next 3-4 years and claim a 3K tax loss each time - so my income would be lowered each year.

Another option is simply to sell it all and claim the 3K loss and carry it to next year.

I want at least some of the cash for a down payment. I'm not really sure what strategy to follow, especially since I recently read a NY Times article that said that the rules changed in 2013.

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    Care to share what rule change you are referencing? – JoeTaxpayer Sep 7 '13 at 2:44
  • Joe: Click NYT Link here from 03-16-2013 or google "nytimes new tax laws cost basis" to find it. – Emmel Sep 7 '13 at 8:45
  • @emmel the new tax law just means you don't need your spreadsheet anymore for NEWLY purchased shares bc your broker reports all the info. you still track cost basis yourself for all shares bought before law took place. – Michael Pryor Sep 7 '13 at 10:56
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Once again I offer some sage advice - "Don't let the tax tail wag the investing dog." Michael offers an excellent method to decide what to do. Note, he doesn't base the decision on the tax implication.

If you are truly indifferent to holding the stock, taxwise, you might consider selling just the profitable shares if that's enough cash. Then sell shares at a loss each year if you have no other gains. That will let you pay the long term gain rate on the shares sold this year, but offset regular income in years to come. But. I'm hard pressed to believe you are indifferent, and I'd use Michel's approach to decide.

Updated - The New Law is simply a rule requiring brokers to track basis. Your situation doesn't change at all. When you sell the shares, you need to identify which shares you want to sell. For older shares, the tracking is your responsibility, that's all.

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You have to calculate the total value of all shares and then ask yourself "Would I invest that amount of money in this stock?"

If the answer is yes, then only sell what you need to sell. Take the $3k loss against your income, if you have no other gains.

If you would not invest that amount of cash in that stock, then sell it all right now and carry forward the excess loss every year. Note at any point you have capital gains you can offset all of them with your loss carryover (not just $3k).

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