Single Stock Tax Loss Harvesting – Buy First, Sell after 30d?

Hi,

Given current market conditions it’s a good time to harvest some losses. For single stocks (not ETFs), this isn’t so easy due to the wash sale rule.

My goal: Let’s say I hold 100 shares in a single company that are 50% down. I believe in the fundamentals and want to keep my exposure of 100 shares, but I want to harvest the loss to offset gains. I don’t plan to completely sell my shares anytime soon.

Usually the discussions on tax loss harvesting I have seen are about selling the 100 shares first. But then you have to wait 30d due to wash sale until you can buy back in and if the stock makes a run up in that time, it can cost you significantly so that’s not worth it.

However, one can do it the other way around as well. I can buy another 100 shares today, then wait 30 days and then sell the previous 100 for whatever loss remains. (just make sure to not buy more 30d after).

In the 30d waiting period one of 3 scenarios can materialize:

Scenario a) the stock made a run up – great I benefited double, I have a smaller tax loss to harvest now, but I would not call that a problem.

Scenario b) Stock remains flat – no issue, that is then the same like selling same day

Scenario c) Stock dropped more. Worst case, now I am exposed times 2 to the drop (200 shares). But I am committed to the company so I will still only sell the lot of the 100 I bought first (higher cost basis). Now I haven an even bigger loss to harvest.

The only drawback I can see is that you need to have enough liquidity to buy first and then hold twice the amount for 30d. So you bind more cash to that stock. But if one is committed to the stock, I think that’s a feasible way to harvest a loss while mitigating the run up risk or is there something I am not seeing?