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Tax Selling

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Tax selling
Selling of securities to realize losses that will offset capital gains and reduce tax liability. See: Wash sale.

Tax Selling
1. The act or practice of selling stock or other securities at a loss in order to offset gains from other investment or income. In the United States, one is able to reduce one's taxable income by the amount one has lost in investing. Therefore, it is common to sell securities that have declined anyway at the end of the year and thereby reduce one's tax liability.

2. The act or practice of selling stock or other securities at a gain in order to reduce an expected higher tax liability. Tax selling at a gain is common in December when an investor expects his/her income to be higher the following year. Thus, one pays the higher income tax on the gains this year rather than pay the higher still gains next year.

tax selling
The sale of securities to establish gains or losses for income-tax purposes. Significant tax selling often occurs in December, especially following a bear market, as investors seek losses to offset previous gains or other income. An investor may engage in tax selling to establish gains when he or she expects to be paying a higher marginal tax rate the following year. Compare tax-loss selling.


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From a negative point of view, continuing tax selling pressure before the year end could temporarily weaken these positives.
To the extent that tax selling is documented in November, this paper presents evidence supporting an explanation of stock seasonalities based on selling pressure.
 
 
 
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