• stock appreciation--avoid gains this way?

    From MZB@21:1/5 to All on Wed May 12 11:49:19 2021
    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

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  • From JoeTaxpayer@21:1/5 to MZB on Wed May 12 15:41:58 2021
    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.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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  • From Taxed and Spent@21:1/5 to JoeTaxpayer on Wed May 12 19:26:01 2021
    On 5/12/2021 12:41 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.



    are options an option?

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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  • From MZB@21:1/5 to JoeTaxpayer on Wed May 12 19:26:36 2021
    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

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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    * Origin: fsxNet Usenet Gateway (21:1/5)
  • From Taxed and Spent@21:1/5 to MZB on Thu May 13 10:54:44 2021
    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.
    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



    You might short sell a "comparable" equity. Not exactly guaranteed
    though. Are Walgreens and CVS "comparable"? In some ways yes, in some
    ways no . . .

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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  • From Tom Russ@21:1/5 to Taxed and Spent on Thu May 13 13:36:10 2021
    On Thursday, May 13, 2021 at 7:59:09 AM UTC-7, Taxed and Spent wrote:
    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.

    It certainly sounds like you may have reasons to want to sell XYZ that are independent of the tax issues. You may not want to have your investment decisions driven primarily by tax considerations, particularly if you believe there is a better investment that will more than make up for the 15% tax rate.

    And a 15% tax rate on capital gains is quite low, both in absolute terms and certainly historically. Figuring out future tax changes is, of course, unknowable
    but it seems more likely that the capital gains tax rate will go up rather than down, given the current historically low rates.

    So it may be wiser to decide if you really want to keep XYZ until death or if it would make more sense to switch to another investment instead. But paying 15% on 100k of gain may be a better wealth-building move than paying 0% on 50k of gain if you believe that the stock price will be heading lower than other available investments.

    --
    << ------------------------------------------------------- >>
    << The foregoing was not intended or written to be used, >>
    << nor can it used, for the purpose of avoiding penalties >>
    << that may be imposed upon the taxpayer. >>
    << >>
    << The Charter and the Guidelines for submitting posts >>
    << to this newsgroup as well as our anti-spamming policy >>
    << are at www.asktax.org. >>
    << Copyright (2011) - All rights reserved. >>
    << ------------------------------------------------------- >>

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