Comments on: Friday Reader’s Question of the Day – Investments http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Thu, 24 May 2012 12:43:16 +0000 hourly 1 http://wordpress.org/?v= By: Finance Buff http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/comment-page-1/#comment-44435 Finance Buff Sun, 12 Nov 2006 02:12:40 +0000 http://allthingsfinancialblog.com/2006/11/10/friday-readers-question-of-the-day-investments/#comment-44435 That's right, 30 days don't apply if you claim a gain. I forgot about that as well. THC is right about the capital loss carry forward. Everything is moot if you have a large capital loss carry forward because the gains will first offset the loss carry forward. As far as commission goes, this might be the motivation to finally transfer those out to a discount brokerage. That’s right, 30 days don’t apply if you claim a gain. I forgot about that as well. THC is right about the capital loss carry forward. Everything is moot if you have a large capital loss carry forward because the gains will first offset the loss carry forward. As far as commission goes, this might be the motivation to finally transfer those out to a discount brokerage.

]]> By: thc http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/comment-page-1/#comment-44389 thc Sat, 11 Nov 2006 23:06:11 +0000 http://allthingsfinancialblog.com/2006/11/10/friday-readers-question-of-the-day-investments/#comment-44389 Joe is right about the wash sale, I stand corrected. What can I say, it's Saturday. Joe is right about the wash sale, I stand corrected. What can I say, it’s Saturday.

]]> By: Joe Taylor http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/comment-page-1/#comment-44367 Joe Taylor Sat, 11 Nov 2006 22:19:20 +0000 http://allthingsfinancialblog.com/2006/11/10/friday-readers-question-of-the-day-investments/#comment-44367 Take the time ro do a pro-forma 1040 for 2006. If indeed you will have no tax due, then start with the mutual funds. You can probably do a free exchange into other similar funds in the same family that will produce realized gains, not incur any transaction fees, and not leave you without exposure to the market. Since you are claiming a gain and not a loss you do not have to worry about the wash sale rule, so waiting to buy back does not apply. If you can liquidate all the funds without any taxes coming due (do another pro forma) then move on to the individual stocks. Be sure the transaction costs do not wipe out your gains, but again there is no need to worry about the wash sale rule when realizing a gain. The advise about IRA to Roth conversion is on the mark. As always if you have doubts consult with a qualified tax professional, Don't be penny wise and dollar foolish. Take the time ro do a pro-forma 1040 for 2006. If indeed you will have no tax due, then start with the mutual funds. You can probably do a free exchange into other similar funds in the same family that will produce realized gains, not incur any transaction fees, and not leave you without exposure to the market. Since you are claiming a gain and not a loss you do not have to worry about the wash sale rule, so waiting to buy back does not apply.

If you can liquidate all the funds without any taxes coming due (do another pro forma) then move on to the individual stocks. Be sure the transaction costs do not wipe out your gains, but again there is no need to worry about the wash sale rule when realizing a gain.

The advise about IRA to Roth conversion is on the mark.

As always if you have doubts consult with a qualified tax professional, Don’t be penny wise and dollar foolish.

]]> By: thc http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/comment-page-1/#comment-44316 thc Sat, 11 Nov 2006 20:23:30 +0000 http://allthingsfinancialblog.com/2006/11/10/friday-readers-question-of-the-day-investments/#comment-44316 Sell 'em! If you want to repurchase after 30 days to avoid a wash sale, go for it. One caveat, if you have a significant capital loss carry forward, you might not want to waste it this year. Sell ‘em! If you want to repurchase after 30 days to avoid a wash sale, go for it. One caveat, if you have a significant capital loss carry forward, you might not want to waste it this year.

]]> By: Finance Buff http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/comment-page-1/#comment-43885 Finance Buff Fri, 10 Nov 2006 21:30:27 +0000 http://allthingsfinancialblog.com/2006/11/10/friday-readers-question-of-the-day-investments/#comment-43885 If the gain is a long-term capital gain, selling it this year will have it taxed at only 5%, instead of 15%, because of this reader's unique income situation. If the gain is a short-term gain, it can be used to fill in the personal exemption and standard deduction and the reader possibly will not owe any tax at all. Converting Traditional IRA to Roth this year is a good idea as well. I'd hate to see the exemption and standard deduction go wasted. If the reader still likes the investment, he/she can wait 30 days and repurchase or just buy a similar fund. It doesn't have to be all or nothing. If I were this reader, I would sell/convert just enough to fill in the zero/low tax brackets. If the gain is a long-term capital gain, selling it this year will have it taxed at only 5%, instead of 15%, because of this reader’s unique income situation. If the gain is a short-term gain, it can be used to fill in the personal exemption and standard deduction and the reader possibly will not owe any tax at all. Converting Traditional IRA to Roth this year is a good idea as well. I’d hate to see the exemption and standard deduction go wasted. If the reader still likes the investment, he/she can wait 30 days and repurchase or just buy a similar fund. It doesn’t have to be all or nothing. If I were this reader, I would sell/convert just enough to fill in the zero/low tax brackets.

]]> By: Foobarista http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/comment-page-1/#comment-43875 Foobarista Fri, 10 Nov 2006 20:40:01 +0000 http://allthingsfinancialblog.com/2006/11/10/friday-readers-question-of-the-day-investments/#comment-43875 I'm not sure about this particular investment, but "zero years" are rare and are good chances to do things like a bigtime Roth rollover if you've got a traditional IRA or old 401K that you want to Roth-ize, assuming you've got the cash to pay the taxes with. I’m not sure about this particular investment, but “zero years” are rare and are good chances to do things like a bigtime Roth rollover if you’ve got a traditional IRA or old 401K that you want to Roth-ize, assuming you’ve got the cash to pay the taxes with.

]]> By: Jeremy http://allfinancialmatters.com/2006/11/10/friday-readers-question-of-the-day-investments/comment-page-1/#comment-43853 Jeremy Fri, 10 Nov 2006 18:52:59 +0000 http://allthingsfinancialblog.com/2006/11/10/friday-readers-question-of-the-day-investments/#comment-43853 When do I consider selling an investment? That depends on a few things. First, what was the objective of the investment in the first place. Long-term (5+ years) or short-term, looking to take advantage of a trend/event to make some money. Then, I look at my current year's taxable gains and losses so far and see how the sale would affect the overall tax picture. If the investment was for the long term, I'd look at the fundamentals (if an individual stock). Find out why it is priced where it is and see if the fundamentals still point towards reaching my long-term goal with the investment. If not, it could be time to sell, which then leads to checking into what the tax implications would be. If it is still fundamentally sound and just not performing well, and claiming the loss wouldn't benefit a whole lot for tax purposes, I might hold on. As always, it comes down to your investment objectives and goals. Before taking tax into consideration you should evaluate your goals and see how that investment fits in it. If the investment does not fit anymore, or its role in your portfolio has changed, move on to evaluate the consequences of selling it. But you should always first bring it back to your investment goals. When do I consider selling an investment?

That depends on a few things. First, what was the objective of the investment in the first place. Long-term (5+ years) or short-term, looking to take advantage of a trend/event to make some money. Then, I look at my current year’s taxable gains and losses so far and see how the sale would affect the overall tax picture.

If the investment was for the long term, I’d look at the fundamentals (if an individual stock). Find out why it is priced where it is and see if the fundamentals still point towards reaching my long-term goal with the investment. If not, it could be time to sell, which then leads to checking into what the tax implications would be. If it is still fundamentally sound and just not performing well, and claiming the loss wouldn’t benefit a whole lot for tax purposes, I might hold on.

As always, it comes down to your investment objectives and goals. Before taking tax into consideration you should evaluate your goals and see how that investment fits in it. If the investment does not fit anymore, or its role in your portfolio has changed, move on to evaluate the consequences of selling it. But you should always first bring it back to your investment goals.

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