!The Fiscal Cliff situation has led many investors to sell stock to lock profits with the lower capital gains taxes of 2012 (cap gains taxes will likely rise in 2013). This leads to selling among traders
in general if they believe stocks will be dumped if traders think they will tank. It
won’t matter if they have got capital gains in them or not.
However, if investors do sell stocks to lock in a lower cap
gains tax, then they could buy them right back in January IF they think
they are going higher. The WASH RULE (30 days) only applies if a
re-purchased stock loses more value…if the re-purchased stock goes
higher, the WASH RULE will not apply and an investor can lock in a NEW
COST BASIS which may be much higher than the previous COST BASIS. Of
course, some investors might sit out the 30 days to guarantee that the
wash rule doesn’t affect them.
Case in point: someone who bought AAPL (click to see chart)
back in 2008 might have had a cost basis of only $80. If they sell now
and re-purchase in early 2013, their new cost basis is surely going to
be much higher than $80 which will mean lower cap gains taxes the next
time they sell…and they also lock in the lower 2012 cap gains tax now.