How to Avoid a Stock Wash Sale

Stock wash sales in place to prevent people from selling a stock to claim the losses and then turn around immediately to rebuy the same stock. This is too easy and allows you to nullify your stock gains at will. However, I found an article long time ago in the Forbes magazine that outlined this method that can get around the wash sale rule legally. Please check with your tax accountant to see if this is still possible as tax rules change and these loop-holes are plugged up all the time.

How’s it going everybody this is beat the bush today i’m going to talk about how you can avoid a wash sale when selling your stocks this video is brought to you by weeble if this video helps you out on saving yourself a little bit of money in terms of short-term and long-term gain taxes don’t forget to check out my referral link down in the video description below

You can get two free shares of stock just for depositing 100 check out my referral link down in the video description below now what is a wash sale think of it like this you have a stock that you plan to hold on to very long term but it has gone down temporarily in value but you want to sort of access this loss so you can cancel out some of the gains from other

Stock sales then that means you don’t have to pay capital gains taxes so if you made ten thousand dollars somewhere else and you happen to be holding some other thing that you know sort of you know in the short term lost ten thousand dollars as well it’s advantageous to be able to cancel these two out but if you sell that particular stock and you buy it within 30

Days it’s what is called a wash sale the rules are if you sell that stock and you buy it within 30 days if it’s some other stock that is virtually the same then that would be considered a war sale so the idea here is to sort of temporarily cancel out your gains for now and later on whatever stock that you repurchase the thinking is that you’re going to hold

See also  What is an Income Statement? | Profit & Loss Account

On to this for the long term so if it’s a long-term capital gains tax it’s not taxed at the regular income tax level which can be up to like 40 percent the long-term income tax is 15 this is kind of a way to force your gains into a long-term capital gains situations so that you pay a favorable capital gains rate now i want to cover if you sell a stock and you do

Not trigger that wash sale rule it means whatever amount that you lost you can cancel out with your capital gains so if it’s like ten thousand dollars that you lost and then you sold some other stock gamestop amc or whatever and you made ten thousand dollars you cancel it out with ten thousand dollars of losses essentially you don’t have to pay any uh capital

Gains tax on the gains on you know the other stock that you made a whole bunch of money on now i’m going to go over this little trick that i learned from the forbes magazine about a couple of years ago i want to emphasize that whatever i am going to cover now it should not be blindly followed i really really think that you should check with your tax advisor or

Whatnot you know see if this is actually something that you can do so i am just sort of regurgitating what is in a forbes article about avoiding this wash sale rule just take this as sort of educational and if you feel like you know you might be able to get some use of it yeah sure you know ask your task advisor and see if this is something that you can actually

See also  North Korea has Received Plans to Fire Missles at Guam

Implement so there’s my disclaimer i’m gonna put it as succinctly as i can you have something that has lost value what you want to do is sell it so you can claim the losses and somehow repurchase those shares very very close to the same day that you sell so this normally would trigger a wash sale rule but the way to avoid it is that you actually buy an out of

Money option call for the same number of shares that you just sold so let’s say you have 100 shares of gold gold is actually what was actually used as an example in this particular article so you sold 100 shares of gold you took a loss of ten thousand dollars and then the way the tax code works is a little bit funny because if you repurchase options in gold

Gld the tax basis would move over to these option calls so what you can essentially do is buy out of the money really really far off in the future or whatnot something like in december of that particular tax year so that it doesn’t really cost you all that much if you buy a 100 share option call it might only cost you five dollars and you buy this the tax basis

Get transferred over to this option call okay so so that is done already and then later on the next day you come around and re-buy the real stocks 100 shares of gld and all of a sudden you’re off the hook for this wash sale rule let me go back to why people actually want to sell something claim the losses and then we buy again because the whole idea here is you

See also  Aurora Cannabis, Tilray, Canopy Growth Corp, Green Growth Brands, Simon Property Group

Actually really do want to hold on to this stock you just want to claim the losses for now because you know it dipped a lot let’s say it’s in the short term and you feel like oh this is a short-term temporary thing it happens all the time with a stock where it dips a lot and then you’re like ah gosh i wish i can somehow take advantage of these losses this is the

Way that you can do it so the idea in many people’s head is that you sell the stock and you want to rebuy it back right away because you don’t want to lose out on the rebound because most of the time it drops sharply and then it comes back up so many people don’t want to sell a stock and just wait around for 30 days because a lot of things could happen in 30 days

It could go down a little bit more or it can just completely rebound all the way so waiting 30 days is is just not an option for you know trying to claim this wash sale rule so that it doesn’t apply to your stock sale hope you guys enjoyed this video and gives you some food for thought over here when i saw this article for the very first time i was in the toilet

And i like almost dropped the magazine i’m like what what this is this this is crazy you can actually do this kind of thing so i did save the article and i just wanted to share with you guys because this is very very valuable information don’t forget to like this video and subscribe for more thanks for watching you

Transcribed from video
How to Avoid a Stock Wash Sale By BeatTheBush

Scroll to top