Tax Rule Changes Regarding Sale of Stock
New Rule Becomes Effective January 1, 2018
Effective January 1, 2018, assuming that the proposed tax law changes go into effect, taxpayers will no longer be able to choose which lot of stock they own is sold. This choosing of the lot that was being sold was referred to as specific identification. Taxpayers could choose which lot of stock was sold (usually the one(s) with the highest tax basis (cost), to minimize the gain on the sale of stock or to generate the largest capital loss to offset capital gains from other sales. Effective January 1, 2018, taxpayers will be deemed to have sold their lots on a FIFO basis, meaning that the oldest lots are the lots sold. The taxpayer will no longer be able to decide which lot is being sold.
Accordingly, if you plan on selling a portion of your stock holdings in a particular stock, you have until December 31, 2017 to make that choice. If you are thinking of selling shares before December 31, 2017 to generate a capital loss but plan to repurchase those shares within 30 days of the sale (or 30 days before the sale), the IRS wash sale rules prevent the taxpayer from claiming the loss.
Thus it is very important to work with your investment advisor and your tax professional to minimize your tax liabilities.
If you would like to discuss your business or personal tax planning, tax preparation and other financial concerns with an experienced tax professional, we invite you to call 610-594-2601 today to make an appointment at our Exton PA CPA office to discuss your situation. You can also schedule a consultation at Click Here.
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