Diversity without tax impact

Netflix / Eng 3 million
Jan 19, 2018 11 Comments

Folks, I have highly appreciated stock that is nearly 40% of my portfolio. Is there any way to exchange that stock with index funds without tax hit?

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TOP 11 Comments
  • The Home Depot / Eng
    Rowsdower

    The Home Depot Eng

    PRE
    Amazon
    Rowsdowermore
    Not unless you’ve got some other capital loss you can take to offset.

    (Eg one of your alt coins is down 40%. You can sell and re-buy, Resetting your basis and then you can offset your gains on the stock with the loss in alt-coins.
    Jan 19, 2018 5
    • The Home Depot / Eng
      Rowsdower

      The Home Depot Eng

      PRE
      Amazon
      Rowsdowermore
      Yeah, wait 30 days or buy a different coin or love to eth for 30 days
      Jan 19, 2018
    • CareerBuilder hdTI13
      Has the IRS established precedent that buying a different coin would avoid wash sale? Rules are fuzzy even with traditional assets. I suppose you could just do it and claim ignorance if you get audited.
      Jan 19, 2018
    • Gen!x / Eng
      XPbr65

      Gen!x Eng

      PRE
      Bank of America Merrill Lynch, HPE, Northrop Grumman
      BIO
      mehy
      XPbr65more
      Wash sale rule would only apply to securities not assets.

      Your alt-coins are assets.

      Do your research ppl!

      PS: Rules are not fuzzy on assets.
      Jan 20, 2018
    • CareerBuilder hdTI13
      Securities are types of assets. The IRS hasn't established whether or not it would apply the wash rule to crypto. Perhaps you should do YOUR research.
      Jan 20, 2018
    • Gen!x / Eng
      XPbr65

      Gen!x Eng

      PRE
      Bank of America Merrill Lynch, HPE, Northrop Grumman
      BIO
      mehy
      XPbr65more
      Does the wash sale rule apply to pork-bellies?
      Jan 20, 2018
  • Apple IyaJ67
    As soon as you sell to exchange it will be a capital gain (or loss). No way around that.

    If you want to avoid the tax hit, you can donate appreciated stock and claim the market value as a tax deductible donation.
    Jan 19, 2018 4
    • Gen!x / Eng
      XPbr65

      Gen!x Eng

      PRE
      Bank of America Merrill Lynch, HPE, Northrop Grumman
      BIO
      mehy
      XPbr65more
      This has always been weird to me.

      When you do this you still come off worse than if you just paid the tax.

      Charitable donation is a deduction and not a credit.

      Am I missing something?
      Jan 20, 2018
    • Apple IyaJ67
      It totally depends on your tax situation. As an example if you're going to be bumped up into the next tax bracket or will get into AMT territory, you can reduce your taxable income by donating appreciated assets and thereby get under that threshold. This of course assumes you've exhausted all other taxable deductions (e.g. 401k, HSA, etc).
      Jan 22, 2018
    • Gen!x / Eng
      XPbr65

      Gen!x Eng

      PRE
      Bank of America Merrill Lynch, HPE, Northrop Grumman
      BIO
      mehy
      XPbr65more
      I don’t see how this saves you money when you get into the next tax threshold.

      Tax brackets are progressive. You’re only paying the larger amount on the delta that exceeds the prior threshold.

      AMT is a bit more complex so let’s table that for a bit.

      From a purely bottom-line oriented position it’s always better to pay the tax.

      If I owe $1000 in tax, a $1000 charitable contribution still leaves me with a $670 Tax bill (at the 33% bracket).

      Sure I feel good about helping the Red Cross but I still have a $670 bill to pay. Total out of pocket becomes $1670.

      Note: I feel I need to note that I support charitable giving. Though using this as a tax management strategy has never made much sense to me.
      Jan 22, 2018
    • Apple IyaJ67
      When you donate appreciated assets you don’t pay capital gains on the appreciation. As an example in your scenario: If that $1000 that you donated originally cost you $100 (e.g. a stock grew 10x), you wouldn’t have to pay capital gains on the $1000, and would reduce your tax burden by $330.

      Total out of pocket after paying the taxes is $670 (remaining tax burden after donation) + $100 (original cost of the appreciated asset) = $770.

      Sure, in this scenario is not a lot, but there potential to reduce taxes while doing a good deed.

      Again, it all depends on your individual circumstance, and it may not beneficial for most, but there are some that could benefit.
      Jan 28, 2018

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