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September 27, 2010


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You won't be able to buy the stock back on the same day you sell it - you have to wait 30 days or else the IRS essentially deems the transaction to have never occurred - it's called a "Wash Sale".

I'm not sure that the Wash Sale rule only applies to capital losses...but you may be right.

IMO, control what you can control. If you think the stock will continue to go up, hold. If you don't, sell. Don't worry about the taxes or anything else.

AT minimum I'd wait till the end of the year to see if the tax rates aren't extended. You're assuming congress won't extend the capital gains rates. Democrats and Republicans both support extending the 0% rate for low income brackets. If Democrats and Republicans support something then I'd hope they can get it done. Course thats not saying they will.

If the 0% rate expires then I'd talk to an expert to find out how it might impact financial aid forms. I think you are right that it might increase your family expected contribution for that year if you sold the stock. But I'm not 100% sure how they treat capital gains in the financial aid calculations.


Did you read the post? The author is aware of the Wash Sale and explained that it doesn't apply. But to be sure lets see what the IRS says about it:

IRS Pub 550:

The key excerpt from that pub under the Wash Sales heading:

"You cannot deduct losses from sales or trades of stock or securities in a wash sale.

A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:"

And then it goes on to list the 4 conditions when you can get into a wash sale. But those are irrelevant because the previous sentence is veyr clear that a wash sale only occurs when you sell stock AT A LOSS.

Easy way to remember: NO LOSS, NO WASH.

And even if the cap gains rate does go up, how do you know it won't go back down by the time you sell? It sounds like you plan to keep the stock for a while. You're planning to definitely pay transaction costs to avoid what might maybe be taxes sometime in the future.

If you constantly rearrange your portfolio based on what might potentially happen sometime in the future, you'll drive yourself nuts.

Now if you need to rebalance, or need the cash in the next year or less, then sure sell it before they go up. But if not, I wouldn't sell it.

Of course, I don't own individual stocks. So my advice is worth what you're paying for it.

I'm not knowledgable about financing college, however I remembered that Kiplinger's recently had an article on a similar problem about how a conversion to a Roth IRA can impact financial aid. That article is at

I did a search and that same Kiplinger author had several other articles about financial aid. Perhaps one of these article can help you:

The sale of the stock could potentially impact your FAFSA results but since a portion of your assets and income are protected under the EFC calculations it may not make much difference.

For more info on the EFC calculation tables, look at page 19 on the following PDF from the Department of Education:

Hope this helps...

Sorry - didn't read as carefully as I thought I did. I was following back up and immediately realized what I'd done.

Questions like this is why the economy scks. No consideration about the soundness of the investment, just consideration of the tax and government aid effects. Just crazy - not the question, which is valid, just the environment.

Sorry about the digression, but it annoys me.

I believe that income affects FAFSA results more than assets so it might cost you to incur the capital gain. You can find FAFSA calculators on the internet(Google it) where you can plug in income, assets, create and compare scenarios. Don't use one that requires registration or a commitment. I know that home equity and retirement accounts do not count against you so a big mortgage payment or pay other debt could help.



Under which environment does tax and govt aid impacts not become a primary consideration?

It's always there which is why whatever the govt does will affect what people do. People don't operate in a vacuum and pretend that taxes don't affect their daily lives.

@mbd, "No consideration about the soundness of the investment" We'll actually they are talking about selling then rebuying to adjust cost basis. Rebuying it would imply they consider it a good investment that they'd want to keep. This is just a maneuver that might help them avoid paying some taxes.

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