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                                         Tax Loss Harvesting (TLH)

If you have a taxable stock market portfolio (not IRA or 401K), and you have stocks or mutual funds showing a paper loss, you may benefit from Tax Loss Harvesting: selling securities (stocks, mutual funds, realestate) at a loss to offset your income tax and capital gains tax liabilities. To avoid the IRS “wash sale rule” you must wait 30-days to re-purchase the same securities or you may immediately purchase securities that are not “substantially identical”.  

                                 Wash Sale

A "Wash Sale" occurs when you sell losing securities and buy "substantially identical" securities within 30 days.

The following is taken from Page 55 of 80  IRS Publication 550  or IRS Wash Sale Web Page:

"Wash Sales <>You cannot deduct losses from sales or trades of stock or securities in a wash sale.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale..".

Note: More information and examples are included in these IRS links.


                                         Substantially Identical

The following is taken from Page 55 of 80  IRS Publication 550  or IRS Wash Sale Web Page:

In determining whether stock or securities are substantially identical, you must consider all the facts and circumstances in your particular case. Ordinarily, stocks or securities of one corporation are not considered substantially identical to stocks or securities of another corporation. However, they may be substantially identical in some cases. For example, in a reorganization, the stocks and securities of the predecessor and successor corporations may be substantially identical.   Similarly, bonds or preferred stock of a corporation are not ordinarily considered substantially identical to the common stock of the same corporation. However, where the bonds or preferred stock are convertible into common stock of the same corporation, the relative values, price changes, and other circumstances may make these bonds or preferred stock and the common stock substantially identical. For example, preferred stock is substantially identical to the common stock if the preferred stock:


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