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Due to taking time off this year, I'll end up in a low income tax bracket that puts me in the 0% long term capital gains tax bracket. I'd like to harvest some gains before the years end and take advantage of this, but I still like a lot of these stocks that have produced the gain and want to stay invested in them. My plan is as follows: before years end, harvest gains right up to the amount of the next highest long term capital gains bracket (15%), and then immediately repurchase the same stocks, leaving my portfolio the same but having taken substantial gains at the 0% rate.

Is this logic sound? Do I have to worry about running afoul of any stipulations that prevent this? I know there's a wash rule for losses, but AFAIK there's nothing that prevents me from doing this for gains.

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Yes. The wash sale only applies to losses. There you just have to ensure there is no buy within 30 days before or after the sell (at a loss) in that or a related security.

The IRS provide people who 'trade substantially' (e.g. home day traders) a "Trader" designation where they can in turn elect to mark their portfolio to market to avoid the headache of the wash sale rules. In that situation their portfolio would be marked to market on December 31st and they would pay tax on any gains since January 1. It is calculated as if the trader opened all their positions on January 1st and closed them all out on December 31st (without having to go through the actual exercise).

https://www.irs.gov/taxtopics/tc429

The trader designation is most likely not relevant for you, but it illustrates how the IRS offer a similar approach to people in other situations.

Here you're actually closing out your positions, taking the tax liability (at the zero rate), and re-opening your positions.

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    can you elaborate a bit on the second part? I'm not familiar with the concept mark to market and how it applies here – Davigor Dec 10 '17 at 4:54
  • I have updated. Mark to market is simply calculating what a portfolio would be worth if you sold your portfolio at the market price. – xirt Dec 10 '17 at 5:02
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No. Your plan is fine. As long as you are only identifying and selling shares that have gains, taking those gains and rebuying the stock immediately, is fine, a great way to bump up your basis, and even set you up to take losses should any fall in the future and you wish to tax loss harvest.

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  • Your answer appeared 15 hours after xirt's, and does not provide any explanation for why xirt's answer is incorrect. – Acccumulation Dec 10 '17 at 22:41
  • I wrote the answer soon after the question posted. Lost connection, and it loaded as you note, well after the other answer. Other answer is not wrong, it just goes on more than needed. – JTP - Apologise to Monica Dec 10 '17 at 23:41

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