Now that autumn has arrived, it’s time to begin “harvesting” capital gains or losses from selling securities held in taxable brokerage firm accounts.
Strategy: Specifically identify the shares you want to sell. If you don’t, the IRS will use a default method to determine the taxable gain or loss. This could effectively increase your tax bill for 2015.
In fact, by using the specific ID method, you might be able to turn a highly taxed gain into a more beneficial tax loss. And the time to do this is now! You can’t wait until you file your 2015 tax return.
Here’s the whole story: When you sell securities, the taxable capital gain or loss is based on the difference between the sales price and your basis. The “basis” for this purpose is usually the acquisition cost plus certain adjustments such as broker commissions. Also, you must adjust your basis for events like stock splits and mergers.
The resulting capital gain or loss is lo...(register to read more)