Sharkey:
Correct:
Let's say you bought 10k shares of CLL in 2008 for $5.00 a share and didn't sell.
This year you make a killing on another stock and profit 40K. You must declare 50% on your return as taxable income. So you add 20k to your total yearly earnings. Now let's say this was an exceptional year for your trading and you know it probably won't happen again for the near future. SO what to do..you don't want the tax man to get the cash.
So you sell you CLL for $1.00 and you now have a 40k loss of which 50% can go against gains for the year. You apply this against the 40K you gained and it cancels each other out and the tax man gets nothing.
Thing is though you really liked CLL which is why you held them for so long and you want to buy your shares back. Well the government ( MAFIA) knows this game and put a rule in that if a sale of a stock is used for a loss you cannot buy it back for 30 business days. So you just hope SP doesn't go up too much..Now Fiscal year ends on Dec 31st..So if you want to flip a stock for a loss and buy back in right away you have to do it at least 6 weeks prior to Dec 31 or mid Nov..Many small caps are used for this. CLL will traditionally dump right after 3rd Qtr mid Nov, hit a new low then spike up as the end of Dec comes around.
So you don't avoid paying the taxes you just delay it until you sell for a profit again.
