Scrambling in a Market Collapse—and a Tax Quandary

BY STEVE DINNEN

How is it that I have lost my shirt in the stock market this past month, yet still owe a ton of money to the IRS? I blame Uncle Sam and the way he treats different investment vehicles. You can blame him, too.

My wife and I have several investment accounts—two IRAs, two Roth IRAs, and two standard taxable accounts. When the market went into a free fall in March, I liquidated a number of positions.

All the money losers were shorter-term investments that were held in either an IRA or a Roth. There’s no tax consequence for either a loss or profit with a Roth, while the IRAs are taxed only upon withdrawal from the account (and as ordinary income, not as capital gains).

But in my scramble to stanch losses, I sold a lot of stock that had seen some very nice gains over the years. My Adobe shares rose 14-fold between acquisition and disposition dates; they’re now up 10-fold. It and other profit- generating stocks all were in taxable accounts. I think I did the right thing, as several positions have since turned to losers.

This leaves me with an opportunity to tax harvest. But it’s too early in the year to fiddle with that. And I’m hoping the market will recover as we move through the pandemic woes, and I can pay taxes on capital gains or enjoy some Roth profits for a change.

You May Also Like

Susan Hatten: Giving Her Time, Treasure, Talents

Writer: Steve Dinnen Susan Hatten has built a solid upward-reaching career path on two ...

Summer Camp: An Investment in the Future

Above: Top summer camps still challenge, inspire and reward youths like these at Teton ...

A Checking Account with a Difference

BY STEVE DINNEN A friend was showing off his new checkbook. Big deal, I ...