Tax TAX TAXXXXXXXX!

[chennyleeeee]

Has anyone considered the possibility of dumping some of their stocks and realise a loss so they can offset some gains throughout the year?

CHEN

 

[wayneL]

Re: Tax TAX TAXXXXXXXX !

Has anyone considered the possibility of dumping some of their stocks and realise a loss so they can offset some gains throughout the year?

CHEN

Hi I'm not an expert, but I think there may be a rule that if you immediately repurchase the same shares in the new fin. year, the deduction will be disallowed, so watch out for that one.

Otherwise if you just want to dump losers, now is the time.

Of course, I may be absolutely wrong, seek professional advise on the matter.

 

[clayton4115]

no

its a perfect strategy to reduce your tax bill, just dump your losers to offset the capital gain and buy back again if you wish.

 

[123enen]

There is a timing issue, I think unofficially.
If it is clear that if a stock has been sold and then almost immediately repurchased the tax office can argue that the only motive was to avoid tax.
They can disallow.

It would be good to allow one or two weeks gap if you can but I doubt that there is an official time gap between sale and repurchase.

 

[Julia]

Has anyone considered the possibility of dumping some of their stocks and realise a loss so they can offset some gains throughout the year?

CHEN

On the assumption, of course, that there will in fact be some gains in the coming year!

Julia

 

[GreatPig]

If it is clear that if a stock has been sold and then almost immediately repurchased the tax office can argue that the only motive was to avoid tax.

So if the same thing was done for a share that was making a positive gain, the tax office would disallow the gain and not charge CGT?

GP

 

[It's Snake Pliskin]

Why not just focus on making profit and reduce your losses whenever it is appropriate.

 

[TraderPro]

I think thats what a lot of people do... according to Alan Kohler in the 7pm ABC news, July is statistically a good month for share growth since the people who sold their losing positions in June - pushing prices down, rebought their positions in May.

"

Hi I'm not an expert, but I think there may be a rule that if you immediately repurchase the same shares in the new fin. year, the deduction will be disallowed, so watch out for that one.

Might ask an accountant that one - but I've never heard of such a rule. There is that 1 yr capital gains tax rule but that isn't it...
--
But I wonder what the Interest rate will be in the US come Friday morning? This event will surely affect our markets right before end of Fin yr.

 

[moses]

Has anyone considered the possibility of dumping some of their stocks and realise a loss so they can offset some gains throughout the year?

CHEN

Probably most people. If you're going to lose money on a stock, you may as well get out of it in June and recover some of your losses sooner with a tax offset. Except of course that everyone else is thinking the same, depressing the prices and making the losses worse than they need have been!

There is no point in creating a loss to offset gains, its just a matter of timing.

 

[moses]

Has anyone considered the possibility of dumping some of their stocks and realise a loss so they can offset some gains throughout the year?

CHEN

Or for that matter if you need the cash anyway it makes sense to take it from poor performing stocks...dump the losers and keep the winners, claim a loss for a tax refund rather than a profit and pay more tax.

What makes this even more effective is that dumping losing shares within 12 months you get to claim 100% CGT tax loss, while keeping the winners longer than 12 months you only pay 50% tax on the gain.

This means there is a significant tax pressure to dump losing stocks in June.

 

[money tree]

instead of all that rubbish....

how about buying a stock cum-div (and selling ex-div) which pays its div after June 30?

you get capital loss this year, and div next year with higher tax brackets....plus the franking credits are a bonus

do it right and you can make $5k doing this.

 

[Realist]

I know the rule in the USA was (is?) that you can not buy back a stock you just sold and claimed a tax loss within 31 days - or they'll get you.

So in Aus it is probably safest to wait over 31 days.

 

[chennyleeeee]

Yeah I had that in mind. Just a little worried whether the tax man would come after you. Equity would assume that it isnt fair on the government to sell and rebuy within minutes of each other. Saving a couple of bucks isnt worth the risk of the tax man I guess.

Oh well I guess I'll just hold on. I have a finance exam on the last day of the financial year and Im not going to spend my day looking at a computer screen trying to pick the best exit and re entry points. haha

CHEN

 

[Duckman#72]

So if the same thing was done for a share that was making a positive gain, the tax office would disallow the gain and not charge CGT?

GP

No because in that case you wouldn't be breachingthe Anti Avoidance provisions - as you would be paying tax. Part IVA only applies to schemes relating to tax avoidance.

 

[GreatPig]

Yes, that was kinda my point.

The tax office have all these rules in place to make sure you can't reduce your tax too much, but still want to hit you with more tax when the almost identical thing is done but at a profit rather than a loss.

In other words, rules for profit are easy: pay tax, but rules for losses are harder: you may be able to claim a deduction or carry forward the loss, but only under certain circumstances etc. etc. etc.

Sort of a heads I win, tails you lose scenario.

GP

 

[carmo]

What would be the ruling if you bought back a stock the next day, but it had in fact dropped 10 cents a share?

 

[chennyleeeee]

I think we need to seek some advise from our accountants about this issue. Wouldnt want our heads on the chopping block when the tax man comes knocking on your door for a daily audit. haha

CHEN

 

[carmo]

Hi Money Tree
This link does not seem to open ?
http://www.number.com.au/forum/viewtopic.php?t=296

Also, I assume the $5k you are talking about is the limit in the "Holding Period Rule" for the "Small Shareholder Exemption".

Also also, any chance of a short list of the stocks that fall under the criteria required?

 

[mit]

Here are a list of stocks that went ex-div before 1-Jul that pay in July. The first column is the exdiv date the second is the payment date,

FKP 26/06/2006 13/10/2006
RCD 26/06/2006 12/09/2006
LEP 26/06/2006 31/08/2006
CDP 26/06/2006 31/08/2006
AIX 26/06/2006 31/08/2006
BWP 26/06/2006 30/08/2006
GHG 26/06/2006 29/08/2006
DRT 26/06/2006 29/08/2006
MPR 26/06/2006 28/08/2006
IWI 26/06/2006 28/08/2006
TCL 26/06/2006 25/08/2006
MLE 26/06/2006 25/08/2006
MCW 26/06/2006 25/08/2006
IPG 26/06/2006 25/08/2006
CPA 26/06/2006 25/08/2006
CNP 26/06/2006 25/08/2006
MOF 26/06/2006 23/08/2006
MDT 26/06/2006 23/08/2006
MAP 26/06/2006 18/08/2006
IOF 26/06/2006 17/08/2006
IIF 26/06/2006 17/08/2006
DUE 26/06/2006 17/08/2006
WOTCA 26/06/2006 16/08/2006
MIG 26/06/2006 15/08/2006
CWT 26/06/2006 15/08/2006
AVJ 31/07/2006 15/08/2006
MCG 26/06/2006 14/08/2006
JFM 26/06/2006 14/08/2006
ABP 26/06/2006 10/08/2006
ALZ 26/06/2006 3/08/2006
MGR 26/06/2006 28/07/2006
CDF 26/06/2006 26/07/2006
PRG 4/07/2006 24/07/2006
ALR 27/06/2006 24/07/2006
BSO 26/06/2006 17/07/2006
COU 26/06/2006 14/07/2006
NAB 2/06/2006 13/07/2006
TEN 26/06/2006 12/07/2006
HME 22/06/2006 12/07/2006
ORI 7/06/2006 7/07/2006
GRD 1/06/2006 7/07/2006
JHX 7/06/2006 6/07/2006
HNG 16/06/2006 6/07/2006
AWB 9/06/2006 6/07/2006
MBL 22/05/2006 5/07/2006
CSR 6/06/2006 5/07/2006
ANC 23/06/2006 5/07/2006
ABB 9/06/2006 5/07/2006
SGB 14/06/2006 4/07/2006
RIN 5/06/2006 4/07/2006
PBD 19/06/2006 4/07/2006
WBC 1/06/2006 3/07/2006
QCH 19/06/2006 3/07/2006
GNC 13/06/2006 3/07/2006
CPB 5/06/2006 3/07/2006
ANZ 15/05/2006 3/07/2006

 

[Kipp]

instead of all that rubbish....

how about buying a stock cum-div (and selling ex-div) which pays its div after June 30?

you get capital loss this year, and div next year with higher tax brackets....plus the franking credits are a bonus

do it right and you can make $5k doing this.

You is a clever fella Moneytree... I like your thinking.
MAP would of been a great stock for this. Massive Div of 13cents payable Aug 20th I think (ex Div date is the 26th June).

I think the other factor we could see though might be a sell-off of over-performing shares in July. I mean, if you owned SBM of INL (or any number of boys which have tripled this year) but wanted to sell out of them surely you'd wait till July... so I think more so than a crash in the UNDER-performers we're more likely to see a Slump in the OVER-performing stocks of FY06...

This is just a prediction, nothing more, the old hands of the forum would have a better view than me.