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How to Take Losses While Keeping Your Allocation

By David Edwards

 About this article:
 With the S&P 500 down 25% since Jan. 1, the Nasdaq down nearly 40%, many companies trading at 52-week lows, the average investor very likely has both stocks and mutual funds showing a capital loss. Over the next one to five years, I'm reasonably confident that the stock market will resume its historic upward trend, but between now and year end, there are techniques that I will apply to my clients' portfolios to make the best of losses we've sustained this year. How the IRS Treats Gains and Losses In calculating your taxes, gains on stock sales held one year or less are taxed at your income rate (max federal tax rate is 39.1%), gains on stocks sales held more than 1 year are taxed at the capital gains rate (max federal rate is 20.0%.) You can net short-term gains and losses to reduce or eliminate the short-term...

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