Capital losses: should you be thankful?

It’s the end of the year: last chance to take stock of your 2011 tax obligations. As an investor, you should make particular note of any realized capital gains. Maybe you sold out of a top-performing asset class to keep your portfolio in balance. Maybe you liquidated some of your holdings to finance a new project or a new expense. In any case, if you sold shares at a profit then the IRS will be asking for their cut.

The good news is that some of your investments may have lost value. While not generally the sort of thing people celebrate, a capital loss provides you the opportunity to defer taxes by a method referred to as tax loss harvesting. In short, losses from one asset sale can be used to cancel gains elsewhere.

Read the rest of this post by Josh Tokle in theĀ FutureAdvisor Research Notebook.

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