Still Time to Record Capital Loss for 2000

Investors who want to take capital losses, or gains, on securities they own can do so through Friday for purposes of 2000 taxes, financial advisors note.

A common misconception is that trades made at the end of the year have to be settled in that year for the gain or loss to be counted on that year’s tax return.

Because trade settlement can take several days, some investors assume that they must complete year-end trading before Christmas to apply a gain or loss to that year’s tax return.

But the Internal Revenue Service revised its rules years ago. Now, capital gains or losses are recorded in the year in which the trade occurs--even if settlement is made in the following year.

For investors who hold beaten-down technology stocks, and who have considered selling to record 2000 tax losses but haven’t done so, that means stocks can be sold as late as Friday afternoon to record the losses.

Should you sell? That is a decision every investor has to make individually, of course. Typically, investors who have large realized capital gains are advised by tax pros to at least consider whether they should realize capital losses to offset some of those gains.

But if you want to sell a losing stock for tax purposes and then buy it back in 2001, be careful to note the IRS’ rules regarding “wash sales.” Those rules require an investor to refrain from repurchasing a stock for 30 days after the sale of the same security at a loss.

If you buy the stock back before 30 days have passed, the loss you recorded is disallowed for tax purposes.