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

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51. i'm not suggesting that the capital gains disappear, only that they're deferred.

you're right that any artificial losses will be offset with artificial gains.

the point is that the artificial losses are realized when you want them for tax avoidance and the artificial gains are deferred for later.


it's also true that my simple example doesn't re-establish a perfect tax hedge for a repeat of this strategy because the long 'a' position is indeed carrying a $50 gain. which isn't a problem next year if 'a' continues to rise (because you'll close out the short position again) but if stock 'a' goes back down the next year to $1, then the short 'a' has a gain and the long 'a' now has $0 profit; there's no loss (or, if stock 'a' dropped even more, there would be a loss but reduced by the $50 gain).

there are more involved ways to extend this further but even just going it the once and re-establishing the hedge and keeping it forever is enough to show the technique.



once again, let me be clear that this is not allowed by the irs; i am not in any way advocating it use. i'm just describing one of many way tax cheats game the system.