Personal Investments • Re: with Spec ID, considerations for which LT shares to sell

I'm glad there are opinions on this so I don't feel too stupid!

Here's a simple extreme edge case to consider with my comments - feel free to disagree:

I own 2000 shares of XYZ trading today at $101
I bought 1000 shares 20 years ago at $1 ( gain is $100 ps)
I bought 1000 shares 13 months ago at $100 ( gain is $1 ps)

Task 1.Capital Gain harvesting ONLY. My income is low enough this year so I can fit in an extra $1000 of CG at 0% tax rate

• I could sell 10 old shares for $1010 with CG of $1000 and then use the $1010 to buy 10 shares back
• I could sell 1000 newer shares for $101,000 with CG of $1000 and then use the $101,000 to buy 1000 shares back

My take - it makes no difference which shares I sell if all I am going to do is buy back all the shares - I still end up with 2000 shares.


Task 2.Capital Gains harvesting but pocketing some money too. Same $1000 of 0% CG but I want to pocket $1000 too

• Selling the 10 old shares realizes $1010 so if I don't buy them back I have 1990 shares, $1000 CG and $1010 cash
• Selling the 1000 new shares realizes $101,000 so I can buy back $100k worth of shares = 990 shares. leaving me with $1000 cash

My take - both task 2 strategies end up with 1990 shares so again it makes no difference. But if I needed more cash - say $5000, then I would be forced to sell newer shares to raise the cash.



Task 3. I suspect XYZ is going to drop 50% soon and want to sell shares but keeping CG below $1000 to minimize taxes

• Sell 1000 newer shares leaving me with 1000 shares, $1k CG and $101k cash
• Sell 10 older shares leaving me with 1990 shares, $1k CG and $1010 cash

My take -selling 1000 shares is way better than selling 10 shares as only the 1000 remaining shares drop 50% vs 1990 shares



Task 4. I suspect XYZ is going to do very well this year and don't want to sell shares but still book the 0% CG
This is essentially the same as Case 1 i.e. it does not matter which shares I sell if I buy them back.



My conclusions for trading for a particular CG

Sell lowest CG shares first if I want to reduce the qty of shares I own
Sell lowest CG shares first if I want to maximize the cash I pocket.
Otherwise, if I am using Spec Id list to choose both amount of cash and amount of CG I want, it makes no difference which shares I sell ( assuming they generate the cash I want)


Did I miss anything?

Statistics: Posted by mrbillium — Fri Dec 13, 2024 11:09 am

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