Question on capital gains

[Muse]

I paid some last year, kind of oblivious because my stock buy/sell rules didn't take into consideration tax implications. This year I figure I should modify my buy/sell strategy some to accommodate tax rules. I just looked, did some calculations. I sold some of my stock holding in October when it had been held over one year, so subject to Long Term Capital Gains Tax rules. I see now that I have some headroom, could sell about an equal amount and still not have to pay any capital gains tax. So, I'd generate some cash that way.

Is there any reason at all that I couldn't just take that cash generated and buy back more shares of my stock? I have lots more of that stock. The stock I would buy now (actually after I sold some shares to generate cash, though not getting CGT, as I say) would be subject to short term CGT for another year, but I have a lot of shares that are long term, and if I sold more shares, wouldn't they go as first in first out? That is, if I sold 1/2 my position, the part sold would be viewed as LTCG. Am I right in this thinking? I have never had an accountant much less a tax attorney, always do my taxes using TurboTax Premier, so please forgive my naivety.

I used this calculator to figure how many shares I could sell today and still not pay capital gains on it:

2025 and 2026 Capital Gains Tax Rates and Rules - NerdWallet

Capital gains tax is a tax on profits from asset sales. Long-term capital gains tax rates are 0%, 15% or 20%. Short-term rates equal ordinary income tax rates.

www.nerdwallet.com

 

[ponyo]

You can specify which tax lots you want sold. Most brokers are going to follow FIFO unless you specify which lot you want sold. Make sure you're familiar with your broker rules before you sell.

 

[Muse]

You can specify which tax lots you want sold. Most brokers are going to follow FIFO unless you specify which lot you want sold. Make sure you're familiar with your broker rules before you sell.

Yeah, thanks, I'll call him before I sell. Am I right about the stuff above? I can just buy back anytime with the cash I've accrued and be short term for a year on the "new" shares?

 

[ponyo]

Yeah, thanks, I'll call him before I sell. Am I right about the stuff above? I can just buy back anytime with the cash I've accrued and be short term for a year on the "new" shares?

yes

 

[Charmonium]

Yeah, thanks, I'll call him before I sell. Am I right about the stuff above? I can just buy back anytime with the cash I've accrued and be short term for a year on the "new" shares?

Yup. But here's something that might 'grind your gears.' If you had sold the shares at a capital loss but bought them back within 30 days, the IRS calls that a "wash" sale and you can't deduct the loss. But if you'd sold for an LT cap gain and buy them back, tough titties.

Wash-Sale Rule: What Is It, Examples, and Penalties

The wash-sale rule is a regulation that prohibits a taxpayer from claiming a loss on the sale of stock while essentially maintaining a position in it.

www.investopedia.com

note: the 'wash sale' rule is actually a bit more complicated, so here is the full quote

The wash-sale rule is an Internal Revenue Service (IRS) regulation that prevents a taxpayer from taking a tax deduction for a security sold in a wash sale. The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a "substantially identical" stock or security, or acquires a contract or option to do so.

A wash sale also results if an individual sells a security, and the individual's spouse or a company controlled by the individual buys a substantially equivalent security.

 

[Muse]

Yup. But here's something that might 'grind your gears.' If you had sold the shares at a capital loss but bought them back within 30 days, the IRS calls that a "wash" sale and you can't deduct the loss. But if you'd sold for an LT cap gain and buy them back, tough titties.

Wash-Sale Rule: What Is It, Examples, and Penalties

The wash-sale rule is a regulation that prohibits a taxpayer from claiming a loss on the sale of stock while essentially maintaining a position in it.

www.investopedia.com

note: the 'wash sale' rule is actually a bit more complicated, so here is the full quote

I figured the wash sale rule wouldn't apply because I wouldn't be selling at a loss but at a gain. Isn't that right? Thus, buying the same stock shortly after selling wouldn't have negative ramifications other than losing the status of my holding of the just bought back shares from long term to short term holdings for one year. If I'm wrong, please explain. Thank you.

 

[Charmonium]

Absolutely yes. I only mentioned it because of the contrast in how LT cap gains vs losses are handled.