The sale of a security that has declined in price since its purchase and the simultaneous purchase of a similar but not identical security, in order to realize a loss for tax purposes while maintaining a position.
NOBODY likes taxes except Bill Gates dad... oddly enough as he told me how he thought to repeal the estate tax was ... well... "Unamerican".
Because we live in a spend now pay later country of instant gratification, -we have accumulated a very large IOU to the rest of the world and hence have high and moving higher taxes.
Your/our benevolent govt and IRS has allowed us to use losses against gains and in some cases ordinary income... (your investment "operations" must run as a business/have the look-feel of a business... Books/records/place of business etc) while I will not begin to give tax advise here as I am entirely unqualified, you should explore every avenue to minimize your taxes... -this may include running your "investment operations" as a business... to schedule C your losses.
That said if you have current losses in your portfolio as 2003 has not been a kind year for the Bears... you may be able to generate some losses to use against taxable gains or income and here is how it works.
Let us say you are short a stock or own a bear fund in a TAXABLE account ie: not an IRA... Let us also say that you are down on that position... you also think that the mkt is overbought and hate to be covering and or selling that bear fund at what could be the worst possible moment... because you lose your position... what you do then is sell the bear fund/cover the short and immediately redeploy the money in a similar yet different security.
While the market may or may not continue moving against you... at least you have 1)generated a loss that can be used on your tax return 2)maintained your position in the event the market turns and resumes going your way You could also do nothing... but then if the mkt did go your way, -you would have missed taking advantage of the losses by generating discount coupons against taxes.
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