CU professor calls “BS” on Romney’s 13 percent tax rate claim

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21. well just for that one paragraph of the explanation, sure, no taxes.

the next line decribes more of the strategy:

"now assuming there's any movement in either direction, you'll have plenty of capital losses and gains to play around with to cash in whenever you need some tax avoidance. "

so the idea is that you have these artificial, offsetting positions, and elsewhere in your portfolio, you also have your real positions. say you cash out of your real positions for a profit but don't want to pay taxes. simple, now you sell your capital losses from the offsetting position but keep your capital gains (you're breaking your hedge in doing this, but you re-establish your hedge with a slightly different instrument or account) thinking that you're realizing enough artificial capital losses to offset your real capital gains.

another tactic is to go long in an ira account and go short the same thing in a taxable account. the gains are tax-deferred, the losses are realized each year.

the irs now recognizes this sort of thing as b.s. and disallows it.