Q: I've read some Q&A on tax-loss selling on this stock, and others in the past. If one were to do this with the plan of buying back - say BCE in this case, is this not a form of market timing that could go very wrong if the price were to suddenly rise? I don't see the benefit, if this plan did not work as anticipated (?)
5i Research Answer:
It is a bit of market timing, but with a significant cushion. A tax loss is a guaranteed benefit through tax savings, assuming one has gains to utilize now, three years in the past, or in the indefinite future. A loss can result in a tax savings of up to 33%, depending on a tax payers' tax bracket. So, while there is some timing involved, it essentially comes down to 'will my stock go up by enough to offset my tax benefit, in a 30 day period'. For most stocks, the answer is no. For a slow growth, large cap company like BCE, the odds of it rising 25%+ in a month are not zero, but pretty close to zero. The tax loss is a defined benefit, whereas on the other side of the equation there is no guarantee the stock will go up.