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Engineering Losses


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Do you guys have any ideas about how one can engineer investment gains and losses?


Edit: I should probably clarify: I'm working on a white paper that looks into how investment accounts and derivatives may be used to engineer gains and losses. I thought some of you folks may have something to add.

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Share structure changes lend themselves to loss engineering where I live. I have no idea if that's the case in other jurisdictions. It's because of a provision in the tax code which allows you to choose between paying 30% on your profit OR use 20% of the selling price as your GAV and pay 30% on the remaining 80%.


So if you for example get new B shares "for free" you could use this method to generate tax losses on paper, because you can declare all of the loss in the A shares but only have to declare 80% of the profit in the B shares.


This is only applicable to different types of shares in the same company (A, B, preferred and whatnot). Spinoffs do not fall under these rules and neither of course do regular new issues of shares.


If anyone knows of any companies which are changing their share structure in the near future, I'd love to hear it. Of course, the more new shares issued, and therefore the larger the loss in value in the original shares, the better the arbitrage is.

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