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Tax Loss Harvesting Rebalance

Contents

Introduction

Rebalance Logic

When To Use

Applicable Settings

 

Introduction

The Tax Loss Harvesting rebalance is sell-only type of rebalance where securities in taxable accounts that meet tax loss harvesting thresholds are sold to harvest those losses. Any cash generated is not immediately reinvested.

This rebalance type can be confused with the Tax Loss Harvesting & Rebalance. The difference between the two is the reinvestment of available cash. The following table compares these two rebalance types:

Tax Loss Harvesting Rebalance Tax Loss Harvesting & Rebalance
A sell-only type of rebalance where securities in accounts that meet the tax loss harvesting thresholds set within the accounts are completely liquidated. A buy-and-sell type of rebalance where securities in taxable accounts that meet the tax loss harvesting thresholds set within the account are sold and the proceeds of those sells, as well as any cash available for trading in the account, are reinvested into the account model.

For more information on using Tamarac Trading for tax loss harvesting, see:

Rebalance Logic

The Tax Loss Harvesting rebalance is used to harvest losses within clients' accounts. First, Tamarac Trading examines the accounts you specify and finds the securities with losses that meet or exceed tax loss harvesting thresholds set within in those accounts. Then, using these thresholds, as well as other system and account-level settings, Tamarac Trading recommends sales of specific lots, then sells those securities and applies the Tax Optimization closing method.

The specific tax loss harvesting thresholds are set at the account level, so this rebalance can only be done in taxable accounts where you've set these thresholds. See Applicable Settings for more information on the various settings that affect this rebalance.

Notes

During the rebalance, any min/max settings for individual models are ignored.

When To Use

The Tax Loss Harvesting Rebalance is useful for quickly harvesting losses across accounts without having to find losses in individual securities within the account. Because this rebalance generates cash that does not get reinvested, this rebalance is useful for buying back into the same securities you sold after the wash sale period has ended.

This rebalance is not available as an account default.

It is important to review any warnings under Rebalance Status Messages on the Rebalance Summary. These warnings let you know about any applicable account, security, or system-level settings.

Applicable Settings

The following is a summary of the settings that apply to this rebalancing type: 

Rebalancing System Settings

Setting More Information

Use relative deviation/ Use absolute deviation

Tells Tamarac Trading how to calculate deviation away from model targets when determining buy and sell order. Absolute deviation uses the absolute calculation of deviation. Relative deviation calculates deviation relative to the parent model's target.

Sell entire security/Sell only losses

  • Sell entire security.Sells entirely out of a security that is beyond the loss threshold specified on the Accounts Settings page.

  • Sell only losses.Sells only the lots that have incurred losses for the security that is beyond the loss threshold you specified, and will not sell the lots that do not meet the loss criteria or have gains.

Account Settings: Rebalance & Trade Settings Panel

Setting More Information

Minimum Trade Sizes

These are ignored in a Tax Loss Harvesting rebalance.

Minimum Holding Sizes

These are ignored in a Tax Loss Harvesting rebalance.

Allow Redemption Fees

This is ignored in a Tax Loss Harvesting rebalance.

Restrict All Securities

If this is selected, you will not be able to complete the rebalance.

Security Restrictions

The rebalance adheres to account-specific restrictions like Range to Hold and any Buy/Sell Restrictions.

Account Settings: Account Configuration Panel

Setting More Information

Round Lot Size

These are ignored in a Tax Loss Harvesting rebalance.

Account Settings: Tax Management Panel

Setting More Information

Closing Method

When using a tax loss harvesting rebalance option, the closing method used will automatically be Tax Optimization, provided the trade file you use supports VSP trading.

Tax Loss Harvesting Settings

Set the loss threshold for tax loss harvesting. If both the percentage loss and dollar amount loss thresholds are met, Tamarac Trading will recommend a sell during this rebalance.

Securities Settings

Setting More Information

Restrictions

The rebalance adheres to security-specific restrictions like Hold Do Not Trade.

Custom Settings

The rebalance adheres to security-specific custom settings like Custom round lot or Custom trade price.