Series 52: 6.2.4. Tax Swaps And Wash Sales

Taken from our Series 52 Top Off Online Guide

6.2.4.  Tax Swaps and Wash Sales

Investors can often reduce their capital gains tax liability without substantially changing their investment portfolio by engaging in a tax swap near the end of a taxable year. A tax swap is the simultaneous sale of a bond to realize a capital loss and the purchase of a bond with similar but not identical characteristics. By selling the bond for less than its cost basis, the investor turns a paper loss into a real loss that can be used to offset a capital gain from another part of the investor’s portfolio. The purchase of a similar bond leaves the investor with essentially the same portfolio as before.

Example: Suppose you own a 20-year, triple-A rated general obligation bond with a 4% coupon rate that matures in 2025. You have owned the bond since issuance, and its value has fallen from its face value of $25,0

Since you're reading about Series 52: 6.2.4. Tax Swaps And Wash Sales, you might also be interested in:

Solomon Exam Prep Study Materials for the Series 52
Please Enable Javascript
to view this content!