which suggested a method to convert dividends to short term capital gains so you can use them to offset capital losses. Basically you sell before every ex date and buy back after. Because the gain you received due to the price rise from ex to ex is a cap gain so you can use it to offset cap losses. I thought it was an interesting tool one might want to keep in their bag of tricks. All my taxable money was converted to real estate investments in the last few years so I can do this but I thought that someone might.
If I understand correctly, a couple questions come to mind:
1. Can't the same thing be accomplished with ANY dividend-paying stock, not just REIT??
2. Can't we accomplish same result by selling ANY stock that has a cap gain, even after passing ex-div day (and thereby taking that dividend) - as long as that stock has a gain . And then, after selling, buying it again if it's a stock you really wanted to keep??? (Isn't the objective here to realize some capital gain in order to offset some previous accumulation of losses?)
Been considering my same situation in view of taking a large loss some years ago, and since then taking the 3K annual offset, but being concerned that I may not live long enough to use up the whole thing, taking 3K at a time, and I really prefer passing my portfolio to my heirs with a "step-up" rather than "step-down" value.....
Any tax experts out there?
The problem with all of that is you have to be having big losses in other stocks, so what are you gaining. Wishing for losses to offset gains just doesn't sound too cool to me. Give me the caoital gains and the dividend any day.
As ehpb1 hinted at, this is useful only for when you have more than the maximum allowed loss ($3k, iirc). Being taxed on recovering your original capital is not right IMO. It's just a shame the law forces you to work around it.
I've been doing just that the last couple of years as I have a lot of old cap losses. Last year both the general market and the mREITS were so strong I was unable to repurchase at good prices and ended up underpeforming both. This year,so far, the dividend cycle seems to be performing well for most of these stocks. Worth looking into.