Harvest Capital Losses
Financial Advisors can use the Tax Loss Harvesting tool to project, preview and allocate trades to take advantage of potential capital losses for all or some of your invested clients.
To Harvest Capital Losses
-
From the Portfolio page, right-click a position with an expected loss and select Tax Loss Harvesting. This might include:
-
A position with negative Unrealized P&L (add the Unrealized P&L column using the Configure wrench icon in the top right corner).
-
A long/short position with Average Price higher/lower than the price at which you expect to liquidate the position.
-
-
In the Tax Loss Harvesting Tool, define the three different sections including:
-
Identify Losing Opportunities - The Advisor may enter in criteria to either sell an entire position which is showing a loss by clicking on "Entire Position" or just the specific lots of that position that are showing a loss by clicking "Lot". Next, the advisor chooses to search for short term losses, long term losses, or Any Losses by clicking the appropriate selection.
The advisor can also define the minimum loss as either an amount or percentage, as well as choose to include nontaxable accounts in the search.
-
Tax Loss Information Summary - The advisor can view a summary of projected losses and tax harvesting opportunities by either long or short positions. The Summary area allows the advisor to see the overall projected losses across all the accounts they manage as well as a summary of the number of client accounts and unique securities where the losses are distributed across.
Each account is listed with the number of securities showing a loss, the projected loss allowed, the projected loss disallowed, the cost, and the projected loss percentage.
-
Find Replacement - In the Find Replacement section an advisor may filter by
-
Account – which allows the advisor to filter by individual accounts or Groups
-
Portfolio – although please note that IBKR does not track tax lots by portfolio segment. The projected P&L calculation uses all tax lots available in the account. While the positions sold within the specified portfolio segment may be sourced from various tax lots available in the account, the desired target position for the selected portfolio segment will be achieved.
-
Individual Security
The advisor can also select the percentage of the position they want to close and for long positions select the replacement method choosing from:
-
Cash
-
ETF – which the advisor can select from a list after clicking the blue ETF button next to the row, or
-
Scanner – which the advisor can select a security in the same sector, industry, and category as the position they are closing.
-
-
-
Once the advisor has made the tax loss harvesting selections, click on the Create TLH Orders button in the bottom right-hand side of the window.
-
This will bring up the IBKR BasketTrader populated with the tax loss harvesting orders. The advisor can adjust the time-in-force, order type, and price when applicable.
-
If the mouse is hovered above the “custom” in the allocation column to see the portion of the order allocated to each account. All accounts involved with the order will receive the same average price.
-
On the next business day following order execution, you can verify the lot allocation by configuring a custom Activity Statement in the Reports section of Client Portal.
To Create a Custom Activity Report in Client Portal to Show Lot Allocations
-
Enter a report name that describes the action, for example "VerifyLossLotAllocations."
-
Select Activity as the statement type.
-
Check the Trades box.
-
Toggle the feature "Hide Details for Positions, Trades and Client Fees Sections" to NO.
-
Continue to save the report.