I've made $530k short term profit this year. So I'm facing a huge tax bill in April. However, I also made one horrible trade on TWTR and now am stuck with a $200k loss on the books. Should I sell off the loss to offset my profits and lower my tax bill? Per wash sale rules, I can repurchase the TWTR shares after a month. Doesn't seem like that stock is going anywhere, so I might be able to repurchase it around the same price, but I'm very uncomfortable taking a $200k loss. Seriously conflicted, and not sure what to do. Got 2 days to make a decision (before Jan 1). What would you do in my situation?
I would call your source at the local paper and whisper ...psst " Blue Horseshoe (AAPL) loves Anacott Steel(TWTR)...
Seems a function of math.... Measure the risk of being out of the position verse losing the tax benefit... Put it into numbers!!!!
If I was in your situation I would dump the stock and take the 200K loss as cost of doing business and get the tax write off. It is not worth the additional risk in addition to the opportunity loss risk by not freeing up capital for a new trade and taking advantage of lowering your tax. #1 unnecessary TAX Bill risk #2 additional loss of capital risk (And still paying taxes on 530K as salt to the wound) #3 opportunity risk by losing out on a profitable trade by hoping to make the losses back on TWTR. Better to admit it was a bust and work on a new symbol/thesis and trade it. Anyhow that is my thought process and how I handle losses against gains. I took a -9,290.66 USD loss against my profits this year but now have a nice profit going for 2016. When I have a position that I do not feel comfortable I will cut it quick and move on. BTW you can sell TWTR and realize the loss. And buy the equivalent number of shares via a long call position. You at least limit your risk if you really want to keep riding the TWTR train. In addition you have working capital released from liquidating that TWTR position for a different trade as well. you can also go long QQQ as well, at least if TWTR rockets up, QQQ will probably be going up as well and you are diversified from single stock risk.
This seems like a no-brainer. Take the loss, sit on the sidelines for a month, or buy options if you think the bottom is imminent. What kind of move in the stock price would it take to break-even on your TLH? I can't imagine it's even worth considering not booking the loss.
Are you qualified as a "trader" in the eyes of the IRS? I.e., can you write off trading expenses due to your trading business (on Schedule C)? If so, then you can take the loss whenever you want and get the full benefit that year. However, if you don't qualify as a "trader" then your capital losses are limited per year (to -$3,000). So suppose you don't take the loss this year and your portfolio is flat the next year - well then you'd only be able to take $3,000 of that loss in 2016 (and have to defer the rest). So take the loss - it is a no-brainer. You get to take the full amount of the loss this year and you save on your taxes.
Tax accountant and financial advisors. Hire one and get to know them well so that you can call them any time especially in situations like this involving this amount of money.