How does taxation on stock portfolios work?

Originally Posted by GreenFrog

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How so? I haven't received the portfolio yet so I'm not 100% sure on the exact details -- all I know is what my dad has told me.

Originally Posted by Dashaansafin

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The markets been doing pretty damn well as of late. I dont understand how it can still be 50% gone unless your relatives diversified extremely poorly.

Exactly. Markets are basically back to where they were before the drop. Assuming your uncle put the money in over, say, the last ten years, on a regular basis, you should be up, not down. He must have bought some really stupid ****.

I am not a manager but asset allocation is a massively important aspect of portfolio management. The rules most even low-level retail advisors follow would have you up right now.

Originally Posted by bringusingoodale

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They thought Blockbuster was bound to regain a sizable marketshare

Originally Posted by Dashaansafin

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The markets been doing pretty damn well as of late. I dont understand how it can still be 50% gone unless your relatives diversified extremely poorly.
As far as I'm aware, some of the stocks include disney and LA gear shoes. I was obsessed with those shoes as a kid, which is why he invested in those, I guess. I really don't know what else the portfolio contains, but those are two of them. I'm going to guess that it's just very poorly diversified, as in he chose a couple of stocks, and simply kept purchasing more and more shares of each as time went on. I don't think he actively managed it, beyond contributing to it each year.

Originally Posted by bringusingoodale

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They thought Blockbuster was bound to regain a sizable marketshare

I wouldn't liquidate. You know more about this gift than anyone here, but I assume that you could have gotten a cash gift instead, so maybe its sort of implied that your uncle and relatives want you to hold onto the portfolio and maybe even play the market a bit?
Possibly. My dad told me this same exact thing. I'm still unsure as to what I'm going to do, seeing as I don't even have control over it yet.. but I will definitely take a look at it once I get it and see what my options are. I just watched limitless so I kind of have an investing tick lol. edit: just read that la gear filed for bankruptcy in 1998 lol

Originally Posted by GreenFrog

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As far as I'm aware, some of the stocks include disney and LA gear shoes. I was obsessed with those shoes as a kid, which is why he invested in those, I guess.
I own Disney. Their share prices have gone up almost 100%, so up $22 in the last two years. Depending on how much of the portfolio is made up of Disney, you should be in decent shape

Originally Posted by Dashaansafin

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The markets been doing pretty damn well as of late. I dont understand how it can still be 50% gone unless your relatives diversified extremely poorly.

Really?

GM
GE
C
JNJ,MRK,PFE
T,VZ
INTC,MSFT

10 of the most widely held stocks by small investors. Small investors who tend to buy what is hot at the moment. The first eight would have been a fairly safe widows and orphans portfolio. The last two market leaders. All Dow30 stocks.

So if bought at the highs.

GM down 100%
GE down over 60%
C down over 90%
Drug stocks all down heavily
Phone stocks all down heavily
So are the other two.

Hell DIS is down what 10% from it's all time high?

The guy had 20K. I think you'll find many small investors who are far far from their all time highs.

NB I didn't even include WaMu,Lehman,Wachovia or any of the other problems.

Originally Posted by Nicola

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Really? GM GE C JNJ,MRK,PFE T,VZ INTC,MSFT 10 of the most widely held stocks by small investors. Small investors who tend to buy what is hot at the moment. The first eight would have been a fairly safe widows and orphans portfolio. The last two market leaders. All Dow30 stocks. So if bought at the highs. GM down 100% GE down over 60% C down over 90% Drug stocks all down heavily Phone stocks all down heavily So are the other two. Hell DIS is down what 10% from it's all time high? The guy had 20K. I think you'll find many small investors who are far far from their all time highs. NB I didn't even include WaMu,Lehman,Wachovia or any of the other problems.
Small investors are marsupials at diversification and dont understand how/what to invest in. They watch Mad Money or search "Top 10 stocks to buy" on Google or something. If you look at the overall market its back to pre recession levels. If he had just simply bought 1 ETF of the Dow/S&P he would be fine. I dont know why anyone would invest in GM, GE, C, Drug stocks, Phone stocks and call that diversification.

If you are really just going to sell it, I *think* it might be better if your uncle sells it and then gives you the cash. That way it least he will get some capital losses to offset any capital gains he might have, which sounds like it disappears if he just transfers it to you. Someone please confirm...

Originally Posted by maverick

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If you are really just going to sell it, I *think* it might be better if your uncle sells it and then gives you the cash. That way it least he will get some capital losses to offset any capital gains he might have, which sounds like it disappears if he just transfers it to you. Someone please confirm...

I don't mean to sound classless, but my uncle is so freaking loaded that the tax advantage he'd get through an offset of around $10K is simply not worth the hurt feelings he might get if I were to ask him to liquidate his years of contribution to this portfolio.

Maybe he'll care more than you think if he invested his own portfolio similar to how he did yours...

And how much less will his feelings be hurt if you accept it and then sell right away?

Anyway, something to think about

So your uncle is "loaded" and he dumps a **** portfolio of 10K on you. Very generous of him.

Originally Posted by Dashaansafin

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. If you look at the overall market its back to pre recession levels. If he had just simply bought 1 ETF of the Dow/S&P he would be fine. I dont know why anyone would invest in GM, GE, C, Drug stocks, Phone stocks and call that diversification.


Those ten stock would have been a third of the Dow 30.

A large percentage of the SP500.


BTW the SP500 is still close to 15% below it's all time high.

Originally Posted by Dashaansafin

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So your uncle is "loaded" and he dumps a **** portfolio of 10K on you. Very generous of him.

lol well, there's a looooooooonggggg story behind all this.

By decent diversification, I would think of at least an S&P 500 fund or ETF (if not a Russell 3000 or even a Wilshire 5000 type). Small investors shouldn't invest too much in individual stocks. While it's true that the S&P 500 is about 15% off its all-time high, his uncle was putting in money over the course of two decades or so, not just during the time that the S&P 500 was riding high, so assuming he put in a roughly constant amount in each month or so, his portfolio should be up quite a bit, and not 50% down unless it wasn't sufficiently diversified.

Originally Posted by Nicola

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Really? GM GE C JNJ,MRK,PFE T,VZ INTC,MSFT 10 of the most widely held stocks by small investors. Small investors who tend to buy what is hot at the moment. The first eight would have been a fairly safe widows and orphans portfolio. The last two market leaders. All Dow30 stocks. So if bought at the highs. GM down 100% GE down over 60% C down over 90% Drug stocks all down heavily Phone stocks all down heavily So are the other two. Hell DIS is down what 10% from it's all time high? The guy had 20K. I think you'll find many small investors who are far far from their all time highs. NB I didn't even include WaMu,Lehman,Wachovia or any of the other problems.

Originally Posted by Nicola

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Those ten stock would have been a third of the Dow 30. A large percentage of the SP500. BTW the SP500 is still close to 15% below it's all time high.

If the portfolio really is in a loss position, I would suggest hanging onto it unless you're pretty sure it's going to continue its downward spiral. A portion of the value is the currently unrealized losses on the portfolio. Depending on the rules where you are, your ability to use those losses to shelter other capital gains is limited. At some point in your life that will be worth something to you - generally, more later, since your income (and therefore the value of the deduction from income) will go up over time.

And it's ridiculous to suggest that he should just throw away 10k of losses, that could be worth close to 5k in itself to him. For Christ's sake, even if he just gives you the extra 5k, it's worth it. Why would you do that?

Originally Posted by AR_Six

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If the portfolio really is in a loss position, I would suggest hanging onto it unless you're pretty sure it's going to continue its downward spiral. A portion of the value is the currently unrealized losses on the portfolio. Depending on the rules where you are, your ability to use those losses to shelter other capital gains is limited. At some point in your life that will be worth something to you - generally, more later, since your income (and therefore the value of the deduction from income) will go up over time. And it's ridiculous to suggest that he should just throw away 10k of losses, that could be worth close to 5k in itself to him. For Christ's sake, even if he just gives you the extra 5k, it's worth it. Why would you do that?
I'm in the U.S., so when I receive the portfolio, wouldn't I only be able to shelter myself against capital gains if the portfolio's value goes down further AFTER I receive it? Or do the capital losses since its inception transfer over to me as well?

I'm pretty sure your cost base gets set as of the point of transfer in the US. Someone probably has told you as much. I am not sure whether he gets to realize his notional losses when he gifts it. If so that may be half the reason he's giving it to you. If not, it's a stupid idea, and he should give you cash, then have you buy the assets from him at FMV.

In answer to your original question, in this circumstance, you could liquidate the portfolio without realizing a gain or a loss, yes.