Should I sell and repurchase this stock for a tax benefit?

Question

I inherited stock 15 years ago with a basis of $54, most recently at $498. I just read an article which discussed selling and immediately repurchasing the same stock to establish a higher cost basis, but did not mention selling at a loss. That makes no sense to me since selling would immediately generate the capital gains tax, which bumps me into the next tax bracket. Is there a scenario in which it makes sense to sell and repurchase if I want to hold onto the stock, other than using to offset any current losses?

Answer 1

Is there a scenario in which it makes sense to sell and repurchase if I want to hold onto the stock, other than using to offset any current losses?

Only to offset current long term losses, but even then - you can use them to offset regular income if you have no other capital gains, which would be much better in terms of tax savings (unless it's a lot of losses and will take forever to eat them up in 3K chunks - then it makes sense).

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It is not clear from your question whether you inherited now a stock purchased 15 years ago for $54, or you inherited it 15 years ago and the basis then (when you inherited it) was set to $54.

If it's the former, then remember that inheritance gets "stepped-up" basis. I.e.: you inherit a thing with the cost basis being it's FMV (Fair Market Value) at the time you inherited it (the time the donor died). So if your donor purchased the shares 15 years ago with the basis of $54, and you inherited them now when they're worth $498 - your basis is $498. No need to sell and repurchase, this is done automatically and is documented on the estate tax return.