i hate this tax selling!!, page-20

Rager - flexability is why, when I have a stock in a large profit position that I have owned for more than 12 months I sell it if I believe I will require some income by the end of the year. I use this on stocks that I intend to hold over a number of years as they develop.

I use this on the family accounts (lower tax rates) and unpredictable casual work income and college kids and the brokerage is so small to be negligible in comparison to the possible flexability gained.

Example of why

owned for 12 months HDR 1.00
1/7/04 sell for $1.94 94 cents realised profit to be taxed- bkg
1/7/04 buy for $1.94

30/6/05 or any time during fin year three choices with stock owned more than 12months

if HDR goes down

1) option may be to sell HDR $1.50 Realised loss of 44c and then pay tax on half of remaining profit of 50c (+.94-(1.5-1.94)) /2=25c

2) If hdr goes up option to
sell HDR $2.44 . Realised profit of 50c plus 94c (50+94=1.44)/2 =72c taxable

3) Don't sell and roll into next year

The big difference (apart from bkg costs) between our ideas is that I have the option to smooth my income . If I leave it till the 30th june each year and have done nothing earlier in the year I have lost one of my options. That option has an opportunity cost of the brokerage and the risk that should the taxable person earn more than expected and HDR has risen further in price I have added to the required tax payable in that year if I have no offsetting losses.

Would hate to say this out loud but it is not hard to create a risk free transaction to create a loss so this rarely happens.

Ted