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What to Do with Low Basis Stock
Posted by Laurie Bencal on Thu, Dec 11, 2014 @ 02:38 PM

Holding a concentrated position in low basis stock can be a dilemma for many investors. With federal long-term capital gains rates up to 20 percent, the 3.8 percent net investment income tax and state income taxes, the cost may be too high to justify selling the stock. Some will simply hold the stock until they die, providing their heirs with a step-up in basis resulting in little or no tax consequences. This could be risky. A drop in share price could result in a significant decrease in wealth. The potential for transactions that the investor cannot control (such as an inversion or other taxable event) pose additional risks. There are options, but none of them are perfect.

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Topics: Laurie Bencal, low basis stock

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