Suppose I own 500 sh of XYZ with a large (long term) cap. gain, say $100K.
XYZ is going down along with the market. I am forced to hold XYZ as I
don't want to pay 15%. My thinking is to leave the stock for my children
so they get the stepped up basis.
But can I do the following:
Sell short 500 sh. of XYZ ("against the box"). This will create a
revenue neutral position for any future changes. Buy it back (ie: close
out the short position) when the market changes, taking the gain/loss on
the short position.
Mel
On 5/12/21 11:49 AM, MZB wrote:
Suppose I own 500 sh of XYZ with a large (long term) cap. gain, say $100K. >>
XYZ is going down along with the market. I am forced to hold XYZ as I
don't want to pay 15%. My thinking is to leave the stock for my children
so they get the stepped up basis.
But can I do the following:
Sell short 500 sh. of XYZ ("against the box"). This will create a
revenue neutral position for any future changes. Buy it back (ie: close
out the short position) when the market changes, taking the gain/loss on
the short position.
Mel
From https://www.investopedia.com/terms/s/sellagainstthebox.asp#:~:text=A%20short%20sell%20against%20the%20box%20is%20the%20act%20of,losses%20and%20net%20to%20zero.
The Taxpayer Relief Act of 1997 (TRA97) https://www.investopedia.com/terms/t/taxpayer-relief-act-of-1997.asp no longer allowed short selling against the box as a valid tax deferral practice. Under TRA97, capital gains or losses incurred from short
selling against the box are not deferred. The tax implication is that
any related capital gains taxes will be owed in the current year.
On 5/12/21 11:49 AM, MZB wrote:
Suppose I own 500 sh of XYZ with a large (long term) cap. gain, say
$100K.
XYZ is going down along with the market. I am forced to hold XYZ as I
don't want to pay 15%. My thinking is to leave the stock for my
children so they get the stepped up basis.
But can I do the following:
Sell short 500 sh. of XYZ ("against the box"). This will create a
revenue neutral position for any future changes. Buy it back (ie:
close out the short position) when the market changes, taking the
gain/loss on the short position.
Mel
From https://www.investopedia.com/terms/s/sellagainstthebox.asp#:~:text=A%20short%20sell%20against%20the%20box%20is%20the%20act%20of,losses%20and%20net%20to%20zero.
The Taxpayer Relief Act of 1997 (TRA97) https://www.investopedia.com/terms/t/taxpayer-relief-act-of-1997.asp no longer allowed short selling against the box as a valid tax deferral practice. Under TRA97, capital gains or losses incurred from short
selling against the box are not deferred. The tax implication is that
any related capital gains taxes will be owed in the current year.
On 5/12/2021 3:41 PM, JoeTaxpayer wrote:
On 5/12/21 11:49 AM, MZB wrote:
Suppose I own 500 sh of XYZ with a large (long term) cap. gain, say
$100K.
XYZ is going down along with the market. I am forced to hold XYZ as I
don't want to pay 15%. My thinking is to leave the stock for my
children so they get the stepped up basis.
But can I do the following:
Sell short 500 sh. of XYZ ("against the box"). This will create a
revenue neutral position for any future changes. Buy it back (ie:
close out the short position) when the market changes, taking the
gain/loss on the short position.
Mel
From
https://www.investopedia.com/terms/s/sellagainstthebox.asp#:~:text=A%20short%20sell%20against%20the%20box%20is%20the%20act%20of,losses%20and%20net%20to%20zero.
The Taxpayer Relief Act of 1997 (TRA97)
https://www.investopedia.com/terms/t/taxpayer-relief-act-of-1997.asp no
longer allowed short selling against the box as a valid tax deferral
practice. Under TRA97, capital gains or losses incurred from short
selling against the box are not deferred. The tax implication is that
any related capital gains taxes will be owed in the current year.
KILLJOY!
Thanks for the info.
So that method was eliminated 24 years ago.
I missed the memo
On the positive side, I'm pleased I remembered the concept!!!
I would buy puts, but the stock is too volatile so the premiums are too
high!
Mel
On 5/12/2021 4:26 PM, MZB wrote:
On 5/12/2021 3:41 PM, JoeTaxpayer wrote:
On 5/12/21 11:49 AM, MZB wrote:
Suppose I own 500 sh of XYZ with a large (long term) cap. gain, say
$100K.
XYZ is going down along with the market. I am forced to hold XYZ as I
don't want to pay 15%. My thinking is to leave the stock for my
children so they get the stepped up basis.
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