Offset losses now or later

In March I sold the mutual funds in my general brokerage account at a big loss and jumped into financial stocks(margined). Since then I've made back a big chunck of earlier losses from the mutual funds and hope to do better by the end of the year. My intention (now) is to hold the stocks for several years, perhaps untill retirement.

I am 60 1/2, plan to retire at 66.

My question is: When should i take advantage of my losses to offset the gains.

AtHome,

It sounds like you have made some good moves, keep it up!

You will report your losses on 1040 Schedule D when you file your 2009 tax return. Following the flow of Schedule D, you will claim a $3,000 loss against your ordinary income. That can continue each year until you have claimed your entire loss.

You do not have any gains until you sell your stocks. If you were to hold your stocks for more than one year before yousell them, you would have a Long Term Capital Gain. The LTCG is currently taxed at a maximum rate of 15%. As the current administration is looking for money so they can redistribute it in the form of stimulus spending, expect the tax rate to increase.

I think I would claim my loss against my gains earlier instead of later. You could sell your gainers now, claim the loss and then immediately reinvest in the same stock and follow your plan to hold the stock for several years.

AtHome,

You will report your losses on 1040 Schedule D when you file your 2009 tax return. Following the flow of Schedule D, you will claim a $3,000 loss against your ordinary income. That can continue each year until you have claimed your entire loss.

I think I would claim my loss against my gains earlier instead of later. You could sell your gainers now, claim the loss and then immediately reinvest in the same stock and follow your plan to hold the stock for several years.

This is the the question I was uncertian about - Sell and repurchase now(or arround the end of the year) and offset gains and loses. or take the $3000/year deduction against future tax returns.

Any suggestions would be appreciated.

AtHome,

Sell now. Capture your gains.

Then repurchase tomorrow.

You can use your losses to offset your gains on your 2009 tax return.

You are planning to hold these assets for many years, and we do not know the direction the value of these assets will take, or when.
I would not wait until the end of the year.

That whole (sell and then immediately repurchase the same stock) thing: The IRS is on to that. The new basis is just adjusted to the basis of the original purchase - The gain (or loss) goes away.
Having said that; you can probably do it without getting caught, if you're sly. I would suggest following the rules.

As a CPA (small business tax accountant), I'd ignore most tax concequences when making buy/sell decisions. The tax question might involve "where do I hold the investment?" IRA, trust, Roth?

Once you have decided to sell; The question, "when do I sell?" should be answered by a trend analyst, in my opinion. Try these guys:
www.emtrendadvisors.com

Fender5150,

There is nothing illegal or wrong with selling at a gain and then immediately doing a repurchase of the same stock.

Selling at a loss and repurchasing 30 days either side of your sell date is called a WASH SALE. Tlhis is where the loss is not recognized, and your basis remains the same as the shares you sold at a loss.

http://www.irs.gov/publications/p550/ch04.html#en_US_publink100010601

Though stocks are more likely to give higher returns, they are also likely to lose larger values, such as we’ve seen in the current economic downturn. I would always say that the closer you get to retirement age, the less you should have in stocks.

A good recommendation is to keep up to 70% in stocks until 2 more years then change the stock mix to about 50% to 60% of your portfolio until retirement. Keeping much in stocks is not at all advisable looking at the current situation.