Aswin

[Aswin]

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I totally agree that the losses can be used to offset future gains.. but even then for the next year the same 3 cases apply. I wud hve agreed with u if it was moved from a tax deferred or a taxed account to this but in our case the weightage of tax exempt accounts ll be reduced to over weight the taxed accounts. So this ll not increase the return ?? or am i missing something very silly in between?

[Aswin]

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I ll explain with an example lets assume total amount is 1000. Tax Exempt – 600 & taxed – 400.
3 cases
1. loss available for offset<400
2. loss available for offset=400
3. loss available for offset>400

1. The loss will be offset completely & on the remaining amount (i.e. 400 – loss) the tax rate of 20% shall be applied. So for case 1 increasing weight to taxed accounts will reduce return as more tax has to be paid on the increased weights.

2. Similar to case 1.

3. The total to be taxed amount of 400 will be offset by the loss of 400. Now increasing weightage to taxed accounts will help offsetting the loss with the gain. But what is the point in moving the gains from an already not taxed account to taxed account to offset the loss? There surely cannot be an increase in return.

Please correct me if I am wrong!

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