Gyroscopic Investing

I spoke to Fidelity today and the rep at their bond desk told me that for me to sell my treasuries and buy back treasuries with a different maturity date  (to avoid a wash sale, which my CPA says is avoided if the maturity date is different), I would be looking at an average bid ask spread of about 75 cents per bond for the sale, and around 75 cents per bond to buy back treasuries with a different maturity date.  Is it worth it to pay this much out of pocket in order to tax-loss harvest?  Tax-loss harvesting is just delaying the taxes, not avoiding them, and since taxes often go up over the years, it's a speculative move because if the tax rate is much higher in the future, I might have been better off paying the taxes now.  I have a short term gain tax liability due to liquidating my portfolio with my old broker before switching to the PP last month.  My treasuries are down around 6% and the amount of short term losses I have in my treasuries is almost exactly equal to the short term gain at my old broker.  My portfolio is fairly large, so it is going to cost about $1,500 due to the bid ask spread to sell my bonds, and around another $1,500 to buy back new ones (unless I buy the new ones at auction next month, but I need to confirm the auction is for a new issue with a different maturity date).  I'm just not sure what to do.  Any advice would be appreciated.

" Tax-loss harvesting is just delaying the taxes, not avoiding them"

how so? A loss that offsets a gain means no tax is due. Ever.

just to clarify...if my math is sound....sounds like you have about $2M of LTT?

murphy_p_t wrote: " Tax-loss harvesting is just delaying the taxes, not avoiding them"

how so? A loss that offsets a gain means no tax is due. Ever.

If you sell at a loss and wait 30 days to re-buy the same thing (or immediately buy something similar), you're effectively resetting your cost basis to a lower point.  You can use the loss now to offset a gain, but when you ultimately sell you have to pay the tax on the increase from the new (lower) cost basis rather than the original (higher) cost basis.  The difference is the gain on which you're not paying tax now - i.e. you've simply delayed paying tax on this gain until later.

The only way you avoid paying the tax completely is if you never sell and the assets become part of your estate.  In this case, the cost basis for your beneficiaries is reset to the value as of when you die (step-up basis).

murphy_p_t wrote: just to clarify...if my math is sound....sounds like you have about $2M of LTT?

I have $1.2M LTT.  I started with $1.3M last month 
I'm thinking the main benefit of tax loss harvesting is that if you delay paying the taxes, that money stays in your brokerage account and grows.  So, for example, if you owe $25,000 in taxes, and you are able to offset that with a loss, that $25,000 can continue to grow in your portfolio for many years and could become $1 million many years down the road.  If you pay the $25,000 in taxes today, it's gone.  Of course, by tax loss harvesting and locking in at a lower cost basis, you will pay more taxes down the road, but it's probably worth it to do whatever you can to keep the money in your brokerage account and grow it.

I bet your stocks are now $1.4m though! 

Try not to get too caught up with the fluctuations of the individual assets. I know that's not an easy thing to do, especially not with a huge portfolio where 1% is enough to buy a luxury car, but it's the only way to stay sane. The PP is a volatility-harvesting machine so you have to look at the big picture.

Pointedstick wrote: I bet your stocks are now $1.4m though! 

Try not to get too caught up with the fluctuations of the individual assets. I know that's not an easy thing to do, especially not with a huge portfolio where 1% is enough to buy a luxury car, but it's the only way to stay sane. The PP is a volatility-harvesting machine so you have to look at the big picture.

My stocks are up about $50K, so that obviously helps a bit.  My LTTs are down 6% and my gold is down around 4%.  Overall, I am down 1.7%.  I can handle the emotions involved.  I don't get overly excited when it goes up, and I don't get overly upset when it goes down.  I take it all in stride.  I'm just trying to figure out if tax loss harvesting is a smart move when there are significant expenses involved to swap out all of the LTTs for new ones.

jason wrote:

Pointedstick wrote: I bet your stocks are now $1.4m though! 

Try not to get too caught up with the fluctuations of the individual assets. I know that's not an easy thing to do, especially not with a huge portfolio where 1% is enough to buy a luxury car, but it's the only way to stay sane. The PP is a volatility-harvesting machine so you have to look at the big picture.

My stocks are up about $50K, so that obviously helps a bit.  My LTTs are down 6% and my gold is down around 4%.  Overall, I am down 1.7%.  I can handle the emotions involved.  I don't get overly excited when it goes up, and I don't get overly upset when it goes down.  I take it all in stride.  I'm just trying to figure out if tax loss harvesting is a smart move when there are significant expenses involved to swap out all of the LTTs for new ones.

You definitely need to change your icon.

I don't think Shelley "The Machine" Levene ever had to deal with this type of "problem."