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So here is my dilemma. I have a really bad stock in the portfolio. To make it simple I'll say it's down $1000. I want to sell it and never buy it back. No wash rule applies here. However, I have a great stock I want to keep forever and have made $1000. I want to sell both. Can I sell the bad stock and write off the balance against the good stock? Here is the tricky part. I want to buy back the good stock right away. I figure I can protect the gains I have made with it, not pay taxes on them, and write off the loss. Is this a good decision? Am I missing something?

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    Welcome to the site. Please note that when you ask a tax question, you need to specify a country tag. – Chris W. Rea Apr 27 '15 at 20:23
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    Are the amounts actually much higher than $1000? You can write off up to $3000 in losses and carry forward the rest. What is it you are hoping to gain from this offset? – Phil Sandler Apr 27 '15 at 21:10
  • Just trying to avoid the taxes on the money made with the good stock and take advantage of dropping the poorly performing stock. – James Brian Apr 27 '15 at 21:16
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    Generally you want to defer taxes as long as possible. So instead of offsetting the capital loss with a gain, you'd probably be better off just taking the loss, and deferring the gain. – Craig W Apr 27 '15 at 21:23
  • @JamesBrian You still didn't specify your country. Is it U.S.A.? – Chris W. Rea Apr 27 '15 at 23:06
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If you are talking about the U.S, the answer is yes, you can use the $1,000 you lost in the bad stock to offset the $1,000 you gained in the good stock, as long as you don't buy back the bad stock within 30 days.

Also, your strategy to sell and buy right away the good stock is pointless. Did you know that you can also use those $1,000 you lost to offset other things? You can use it to offset your ordinary income (your normal job income) up to $3,000 per year; any amount beyond that can be used in later years. Your ordinary income is probably taxed at a higher rate, so it makes sense to offset that instead.

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    You can offset an unlimited amount of capital gains with capital losses. Net capital losses are limited to $3000 per year. – Craig W Apr 27 '15 at 22:32
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    @CraigW You're right. I corrected my answer. – AxiomaticNexus Apr 27 '15 at 22:36
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Assuming US:

Capital losses certainly count against capital gains on your taxes, but that sell and rebuy also means you're resetting the baseline so you'll be reporting greater capital gains later. Basically all you're doing is shifting when you'll pay the taxes, and quite possibly paying a transaction fee or two to do it. There may be cases where changing when you pay the tax his advantages, but you haven't presented us with such a scenario.

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    ? The sell/rebuy actually raises his basis. Right? He's selling/buying the winner to create the gain. What you missed in your answer is that the loss would offset regular income, perhaps at 25%, but the long term gain is potentially taxed at 15% or lower. – JoeTaxpayer May 2 '15 at 14:38
  • Hmmmm. You're probably right; you usually are... – keshlam May 3 '15 at 1:42
  • Don't make me blush. But of course, the complement is appreciated. – JoeTaxpayer May 3 '15 at 2:12
  • Hey, as a financier I make a great electrician... and that ain't my area of expertise either. – keshlam May 3 '15 at 3:59
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I have had the same question regarding selling a poor investment at an $8k loss. Since I am over the $3k per year limit, yes I could carry the balance of $5k into next year and the next, but I don't need to as I already have a large loss that I inherited from an estate.

On the other hand, I would like to "reset" the base cost of an investment I have held for a long time and realize the capital gain to offset the other loss. Resetting the baseline should I choose to use the capital gains to repurchase this stock or another stock would enable me to sell the new stock with less capital gains in the future and therefore pay less taxes.

Also keep in mind that the tax laws may change in the future, and that this scenario may not benefit other situations as indicated by other comments.

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