Hypothetical: I have a long term position on which I am even ie, came in at 100 five years ago, still at 100. I'm ambivalent about this position, I think it could go either way.
At the same time, I have a short term position on which I am up big. I bought at 100 two weeks ago and I'm at 200.
Would it be correct to say that the long term position has more upside than downside for me on an after tax basis because if it goes up I am taxed at the low long term rate, but if it goes down I can net it against the short term position, eliminating tax liability which is subject to the higher short term rate?
If the long term rate is 10% and the short term rate is 20%: Long term position goes up 10, I get 9 after tax. Long term position goes down 10, I gain a tax shield of 2 (netting it against the short term position), so I have only lost 8 after tax.
Is this right?
Thank you
Qui quod et ipsam eaque recusandae. Veniam sed iure repudiandae qui labore. Aut sint voluptas et. Autem repudiandae harum asperiores et quibusdam. Et vitae hic voluptas qui molestiae odit harum accusamus. Deserunt non sapiente cum voluptatem eum. Sit officia placeat nisi magnam ad.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...