Comments on: Market Rally: Proceeds of Tax Loss Selling?

By: The Well-Heeled | Creating Wealth Through Knowledge

The Well-Heeled | Creating Wealth Through Knowledge — Fri, 16 Jan 2009 19:19:04 +0000

[...] Where Does All My Money Go: Market Rally: Tax Loss Selling? [...]

By: Antony Pranata

Antony Pranata — Wed, 07 Jan 2009 21:35:06 +0000

@Preet: Thanks. I am looking forward for the posting.

By: Preet

Preet — Wed, 07 Jan 2009 20:14:35 +0000

@ Antony – thanks for the question – I’ll write about it tonight as a separate post. Thanks!

By: Preet

Preet — Wed, 07 Jan 2009 20:11:40 +0000

@ Thick – I think there may be a lot of “hope” out there that a new year automatically brings new fortunes…

By: Preet

Preet — Wed, 07 Jan 2009 20:09:52 +0000

@ Million Dollar Journey – I believe they make the announcements this Friday. If I get it, I think Mr. Cheap should have to put on a dress and post a photo to Four Pillars.

By: Preet

Preet — Wed, 07 Jan 2009 20:08:57 +0000

@ Mark Noble – I would tend to agree with your conclusion – and that’s an interesting point about the time of the year for deploying funds into more exotic strategies – thanks for that!

By: Thicken My Wallet

Thicken My Wallet — Wed, 07 Jan 2009 19:28:07 +0000

Nothing has fundmentally changed between Dec. 31 and Jan. 1 to make me change my behavior of doing nothing and seeing which way the wind blows for a consistent period of time.

By: Antony Pranata

Antony Pranata — Wed, 07 Jan 2009 19:07:13 +0000

I am still a little bit confused with how capital loss is used to deduct our capital gain. It is mentioned that we cannot buy the same security within 30 days after we sold it. However, if we buy the same security, we can add it to the adjusted cost base of our next buy.

From the amount money we can deduct, isn’t it just the same? For example:

I bought shares of X at $5000.
I sold it for a loss at $4000.

It means I have capital loss of $1000.

Then I buy shares X within 30 days after I sold it with the price of $3500.

It means our new cost base for this transaction is $4500 ($3500 + $1000).

If later, I sell the shares for $5500; my capital gain would be $1000 (instead of $2000). So, I need only to pay tax on $1000 gain.

If I buy the same securities after 30 days, it means I get deductable from capital loss of $1000. Then later I need to pay for my capital gain of $2000. It other words, I only need to pay my capital gain of $1000.

Aren’t they just the same? Am I missing something?

By: Million Dollar Journey

Million Dollar Journey — Wed, 07 Jan 2009 15:59:08 +0000

Another great article Preet. Thanks for the mention.

When do you find out about the TV series?

By: Mark Noble

Mark Noble — Wed, 07 Jan 2009 15:57:26 +0000

I was looking into this as well.

A lot of analysts have been predicting a “January Effect” this year since there are huge amounts of tax-loss proceeds that can be redeployed.

Risky and distressed asset classes typically get a bump as many fund managers get a clean slate to divert from their benchmark and try to place bets. (They have another 11 months to get back or or above their benchmark)

The market performance can be very short-lived.

My understanding is you have to wait until the end of the month before you can even consider to start assessing whether fundamental confidence is returning to the market.