Thursday, December 31, 2015

Completing QCOM Tax-loss Harvesting

In November, I wrote about the other way to harvest tax losses. Instead of selling a losing position
in December to offset capital gains and so limit your tax liability, you could double down by buying an equivalent number of shares in November, wait 31 days and then sell the original position in December before year's end.

I mentioned potentially benefiting from doubling down, including the so-called Santa Clause rally when stock prices generally increase over the final week of trading. Should the market rally, you'll end up with a smaller loss on your original position and gain on the new position.

While reviewing my portfolio, I identified Qualcomm Inc (NASDAQ:QCOM) as a candidate for tax-loss harvesting. At the time, QCOM was trading at $49.10 for an unrealized loss of nearly 25%. One added benefit of doubling down on my QCOM position was that I would have received a larger dividend payment in December.

I bought shares of QCOM in two batches, first in April 2015 and then in July 2015.

In November, I added 90 shares at $49.32 per share. My plan was to sell the original 75 shares after 31 days and so to harvest the tax loss. Instead, I decided to sell 65 shares and to keep 10 shares of the second batch. The trade worked out nicely, as QCOM improved to $51.06 per share in 35 days. 

Trading Summary


Closed Position
2015-04-17
 Bought: 37 shares of QCOM at $67.93 per share:
$
2,513.41
2015-06-24
 Dividend on 37 shares at 48¢ per share:
$
17.76
2015-07-16
 Bought: 28 shares of QCOM at $64.43 per share:
$
1,804.04
2015-09-23
 Dividend on 65 shares at 48¢ per share:
$
31.20
2015-12-18
 Dividend on 65 shares at 48¢ per share:
$
31.20
2015-12-29
  Sold: 65 shares of QCOM at $51.06 per share:
$
3,319.10
Capital loss:
$
998.35

Dividends received:
$
80.16

Commissions/fees:
$
6.00


Net loss:
$
924.19


The net loss is 21.4% on the original amount invested. For tax purposes, it is a short-term loss and I should be able to deduct it from 2015 capital gains.

Following are details on the open position:

Open Position
2015-07-16
 Bought: 10 shares of QCOM at $64.43 per share:
 $
644.30
2015-09-23
 Dividend on 10 shares at 48¢ per share:
 $
4.80
2015-11-24
 Bought: 90 shares of QCOM at $49.32 per share:
 $
4,438.79
2015-12-18
 Dividend on 100 shares at 48¢ per share:
 $
48.00
Capital invested:
$
5,083.09

Dividends received:
$
52.80

The average cost basis of my 100 QCOM shares is $5083.09/100 or $50.83. Yield on cost (YoC) of the first buy is 2.98% and for the second buy, 3.89%.

Concluding Remarks


Taking a loss on QCOM for the sake of tax-loss harvesting is not a pleasant affair, but, at least, I grabbed a larger dividend in December and reduced QCOM's cost basis! I'm hoping the company will continue to pay and grow its dividend for many years to come...

Did you execute any tax-loss harvesting trades this year? Do you think it is worth the effort? Please comment below and thanks for reading!

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