This neutralization comes in the way of marrying capital losses to capital gains. The value of this analysis is easy to quantify and is realized by the client each year at tax time. The dollar value of this effort is measured by taxes your client would have paid if your diligence had not been exercised. Care must be taken when performing this type of strategy to not run afoul of the wash sale rule. Remember that tax optimization is not meant to change the investment goals of the portfolio.
Many clients are reluctant to sell assets with losses to offset a gain.
Often times they wish to sell a position and purchase it back again. The IRS disallows loss deductions from such transactions under the wash sale rule. Analysis Checkpoints 1. If the client has unprotected capital gains, the fixed income portfolio should be examined for realized losses. These losses are targeted for liquidation creating a recognized loss to offset gains.