As we end 2022, I want to bring up a topic that I typically do not talk about a lot.  That is…. taxes.  I know that most of my readers are not interested in that type of thing, but 2022 was an important year for me in that sense.  I am reminded of one of my favorite movies (and now a Netflix series with a new name) The Karate Kid.  Mr. Miyagi says that when the student is ready, a teacher will appear.  This year has been a great learning experience for me.

Throughout my career, I have made my main point of emphasis on being long term bullish and short term cautious.  I still have that sentiment and will likely never change it.  However, I learned a few things this year that have shown me that simply beating the market may not always be the best value-add for a client. 

For example, what if you have income that is below a certain amount during the year (I want this article to be evergreen so that is why I’m not giving specific 2022 amounts), and you have long term capital gains in some of your stocks (not in an IRA).  If you sell those stocks and buy them back right away for possibly the exact same price, you have immediately raised your cost basis on the stock without having to pay a long-term capital gains tax.  Also, with most brokers not charging a commission anymore, it can be pretty easy to do.  Keep in mind that you risk “slippage” when doing this.  In other words, the stock may move up a bit while you are making this trade and you would miss out on it.  However, it can go down as well…just know that it is a risk.  Now, let’s say the stocks go down the next year after doing this maneuver, and you want to sell them for good.  Let’s also assume they are still significantly above your original cost basis.  At that point, you can sell the stocks for a loss when they were actually a gain. 

Above is just one example of the things that I plan to be writing about in 2023. 

As with anything, make sure that you consult with a tax advisor before doing anything. 

If you would like to discuss this topic or anything else I’ve written about, please email me at mtosaw@rcmfs.com.

Happy New Year!