Sharing Knowledge in Smallcaps

[timhyma]

Loss Leaders
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With stocks down sharply in 2008, you should realize capital losses
by selling securities held in taxable accounts by year-end. Those
losses can offset realized gains, if you have any in 2008. Up to
$3,000 worth of net realized losses can be deducted against ordinary
income.

Net losses over $3,000 can be used in future years, with no time limit.
That is, they can offset any future capital gains, until they're used
up. Each year, net losses that you haven't used will provide you with
another $3,000 tax deduction.

After you harvest capital losses in this manner, you must be aware of
the wash-sale rules. If you buy back the same security that you sold,
or a security that's substantially identical, within 30 days, your
tax loss won't count. Thus, you can park the sales proceeds in a money
market fund for 31 days before reinvesting. Alternatively, you can
immediately buy a security that is not substantially identical to the
one you've just sold at a loss.