Subject: Re: "Dozens" Screens
It does matter, just not as much as most people would think.

Well, yeah, it doesn't hurt, in the normal course of updating a screen, to sell a loser that you are going to sell anyway, to sell it just under the wire. and to delay selling a winner that you are going to sell anyway, to delay the sell for a few days to get it over the wire.

I think that as a practical matter, it only makes an insignificant difference.
I suspect that for most people they will be either keeping a winner much longer than a year or selling it much sooner than a year.

And if you end up with a net loss, it's likely to be deducted at the short term rate.
Not "likely". "Will".
Because $3000 of it will come off of ordinary income, which is the same rate as short-term rate.


I guess people like those doing heavily MI screens do monthly evaluations and sell stocks long before 365 days of holding. Both winners and losers. So it's rather a non issue.

The only opportunity you would have to play a few days before or after 365 days would be for an annual screen. And how many MI screens are annual?

Since short-term and long-term trades are netted out together, the only tax advantage there is for an excess of short-term losses is the $3000 you can deduct from your taxable income.

Basically, a short-term loss first takes away from short-term gain, then takes away from long-term gains. Leaving you with either a net long-term gain or short-term gain or up to $3000 deduction. The only advantage of a short-term loss is if you also have a large short-term gain for it to cancel out.

First you compute the total short-term trades, then you compute the total long-term trades. If both are net gains you have $XS taxed at ordinary income rate and $XL at long term rate.

If short-term is a loss, you subtract that from the long-term and if that is still positive you pay the total at long-term rate.

If LT is a loss you subtract that from ST and if that is still positive you pay the total at short-term rate.

If that sum is negative, you deduct it (max of $3000) from your ordinary income, regardless of if is net LT or ST. But it's effectively ST since it comes off of ordinary income. The excess loss gets carried forward to the next year. Where again the ST loss cancels out first ST gains then LT gains.

Where it *does* matter is if you can lump your ST losses and LT gains into different tax years. But even then the net effect is small.

It took me a few years to figure all this out. I focused on making sure my losses were short-term and my gains were long-term. Until I finally realized that it didn't matter in a hill of beans.

It's somewhat like the "tax loss harvesting" excitement. At first blush it sounds like a good deal, but when you look at the full situation over several years you see the effect is minimal.


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Throughout most of the year you cannot predict whether you'll end the year with a net gain or a net loss.

As I am sure you know, after you've been successfully investing for a long time most of your holdings are long-term and with large gain. So it doesn't matter if your losses are ST or LT, because they'll just reduce your net LT gain.

For the last many years most of my gains have been LT and most of the losses have been ST (and small). Because losers tend to drop out of the screen/portfolio fairly quickly.

Not in 2022, though. The ST loss was much larger than the LT gain. So all but $3000 of that loss was carried over to 2023.


Sorry, I didn't mean to go on for so long. Just delaying bedtime.