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I inherited stock 15 years ago with a basis of $54, most recently at $498. I just read an article which discussed selling and immediately repurchasing the same stock to establish a higher cost basis, but did not mention selling at a loss. That makes no sense to me since selling would immediately generate the capital gains tax, which bumps me into the next tax bracket. Is there a scenario in which it makes sense to sell and repurchase if I want to hold onto the stock, other than using to offset any current losses?

JohnFx
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Kathy D
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    You mention tax brackets; in order to answer this question correctly we need to know where in the world you are and what laws/taxes apply. Can you [edit] your question to include a location tag? – yoozer8 Apr 04 '23 at 01:45
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    Tax brackets are marginal so even if you were just $1 below the limit of one, the next bracket applies only to the income above the limit (not your entire income, as some people erroneously think). There are some cases where bumping your AGI above some limit has other undesired effects (like eliminating certain deductions). All that said, no, there is likely no benefit to selling and buying now to reset your basis. Sell when you actually want the money, or when you want to get rid of that particular stock. – nobody Apr 04 '23 at 01:53
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    If you are in the United States, does this answer your question? https://money.stackexchange.com/q/29096/36669 – yoozer8 Apr 04 '23 at 02:08
  • It’s April. You know now that you are at the very top of your existing bracket? – JTP - Apologise to Monica Apr 04 '23 at 02:26
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    Reminder for those who may not know: The basis price of stock resets on the date it is inherited. You aren't liable for taxes on gains during the decedent's life. (This does not apply to stock gifted, or put into a trust, before death.) – keshlam Apr 04 '23 at 03:26
  • Why would you want to establish a higher cost basis? – littleadv Apr 04 '23 at 05:08
  • @JTP-ApologisetoMonica does it matter, since such a sale would be a LT CG? – RonJohn Apr 04 '23 at 05:37
  • @RonJohn why wouldn't it? – littleadv Apr 04 '23 at 05:42
  • @littleadv because the sale of those shares is taxed at the LT CG rate, not the regular income rate? – RonJohn Apr 04 '23 at 05:44
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    @RonJohn LTCG rates have brackets – littleadv Apr 04 '23 at 05:52
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    Since this seems to be US, the article probably didn't 'mention' selling and rebuying a loser to establish a lower basis because that doesn't work -- the 'wash sale' rule disallows recognition of the loss and you must instead add it to basis of the new stock, putting you back in the same position except with a new starting date. We have dozens if not hundreds of Qs about this case already. – dave_thompson_085 Apr 05 '23 at 01:30

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Is there a scenario in which it makes sense to sell and repurchase if I want to hold onto the stock, other than using to offset any current losses?

Only to offset current long term losses, but even then - you can use them to offset regular income if you have no other capital gains, which would be much better in terms of tax savings (unless it's a lot of losses and will take forever to eat them up in 3K chunks - then it makes sense).

It is not clear from your question whether you inherited now a stock purchased 15 years ago for $54, or you inherited it 15 years ago and the basis then (when you inherited it) was set to $54.

If it's the former, then remember that inheritance gets "stepped-up" basis. I.e.: you inherit a thing with the cost basis being it's FMV (Fair Market Value) at the time you inherited it (the time the donor died). So if your donor purchased the shares 15 years ago with the basis of $54, and you inherited them now when they're worth $498 - your basis is $498. No need to sell and repurchase, this is done automatically and is documented on the estate tax return.

littleadv
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    If one is in the zero LTCG bracket, it might make sense to sell/buy and bump up their basis at little cost (maybe a few cents a share for a stock bid/ask spread). This would help avoid having to pay tax as one's income rose above the zero LTCG threshold. – JTP - Apologise to Monica Apr 04 '23 at 14:15
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    "I inherited stock 15 years ago" no ambiguity that I can see, here (still useful information for other similar cases, though) – njzk2 Apr 04 '23 at 20:58