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Duration: 6:22

Level: Beginner

The Allocation Order Tool Tax Harvesting feature helps Financial Advisors to preview potential losses on stocks for their clients. Advisors can choose to search for short term, long term , or either loss and create orders to harvest those losses. The tool allows Advisors to pre-allocate the trade lots for multiple accounts at once.

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Study Notes:

Financial advisors can use the Allocation Order Tool to help clients realize the tax benefits of harvesting capital losses. Advisors can preview the potential losses on stocks and pre-allocate shares across multiple accounts to fully or partially close out positions and harvest the capital losses. Tax loss harvesting can be a useful part of an overall financial plan and help lower your clients’ overall tax burden, especially if they are in a higher tax bracket.

  • To use the Trader Workstation Tax Harvester tool in Mosaic, first bring up a symbol in which you have an expected loss.
  • The easiest way to check whether a position is currently at a loss is by having the Unrealized P&L data column displayed in the portfolio tab.
  • The data column can be added by clicking on the gear icon in the upper right-hand corner of the Portfolio tab.
  • After entering the symbol into the Mosaic Order Entry panel click the order side that will close out the position, if you are long click sell, if you are short click buy.
  • Now go to the “advanced button” and click on the plus sign.  The Advanced window will appear, click on the Allocation Order Tool button located on the left-hand side.

The Allocation Order Tool will appear on your screen. We will now go through how to use the Order Allocation Tool to manage harvesting tax losses for multiple accounts.

  • In the top right corner next to View Capital Loss/Gain click on the drop-down box and choose “Any”, “Short term”, or “Long term”.
  • For this order we will choose Any.
  • Read through the disclaimer and when you are ready to continue click “Accept”.
  • On the right-hand side under allocation a new choice will appear, “Liquidate X% of losing positions to harvest Any Capital Loss”.
  • If you choose Short-Term or Long-Term instead of Any, it only looks for the desired time period.

Prior to setting the allocation let us take a minute to point out two new data columns in the Allocation table that appear when using the tax harvesting features. They are Position at Loss and Projected Short, Any, or Long-Term Loss, depending which category you choose.

Choose the reference price which should reflect the price at which you project the order will be filled at. For example, the limit price you are using on the order.

You may also filter which accounts you want to include or exclude on the trade by setting the allocation in the top left-hand corner to All or a specific Group. Directly below in the Filter area check the box next to “and Any Capital Loss”.  To learn other more about the Allocation Order Tool’s filtering ability please watch the “TWS Allocation Order Tool” video lesson in Traders’ Academy.

When ready to allocate, choose what percentage of the losing positions to liquidate by clicking on the top choice underneath Allocation. Fill in the percentage. If you try to manually change the volume calculated for each account you will get a warning, “The quantity entered is different from you Position at a Loss. Are you sure you want to proceed?” Here, I will click cancel and the value will reset to the original amount.

Click the blue “Set Allocation” in the bottom right-hand corner and the Order Entry Panel will now be populated with the correct size and allocation. It is important to note that the Time in Force must be set to “Day”, or else it will not be transmitted. If you choose GTC a warning will display asking if you’d like to change it or else, it will not be submitted. When satisfied with the order click Submit and the Order Confirmation window will come up showing order type, price, and allocation details. When ready click Transmit, to send your order.

The Advisor Portal allows you to create custom statements to verify the lot allocation.  Once the custom report has been created and saved it can be run on the next business day after trades are made to confirm the lot allocation. To create a custom activity statement log in your Advisor Portal, click Reports, and select Statements.  Click the Plus sign next to Custom Statements and name the report. Let’s call this one Tax Lots. Select Activity for Statement Type, and in the sections, area click Trades. In the Section Configurations area next to Profit and Loss select MTM and Realized P/L in the drop-down box.

Ensure that the toggle next to “Hide Details for Positions, Trades, and Client Fees” Sections is set to NO. When ready click Continue and you will be able to review your settings, once reviewed click the Blue Create button in the bottom right-hand corner. A message will confirm your Custom Statement has been Saved. Click ok. Now you can  run the report anytime for any or all your accounts.

The output will show your list of trades. Click the plus sign next to a trade to expand and you will see the Closed Lot details. Losses will be shown in red, and gains will be shown in green. On the far-right column under Code it will show either ST for Short-Term or LT for Long-Term.

The TWS Allocation Tool’s tax harvesting feature is an extremely useful tool for Advisors who want to utilize tax harvesting for their clients. With this tool the Advisor can easily preview stock capital losses and pre-allocate a trade to multiple clients at once.


Disclosure: Interactive Brokers

The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Supporting documentation for any claims and statistical information will be provided upon request.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: Order Types / TWS

The order types available through Interactive Brokers LLC’s Trader Workstation are designed to help you limit your loss and/or lock in a profit. Market conditions and other factors may affect execution. In general, orders guarantee a fill or guarantee a price, but not both. In extreme market conditions, an order may either be executed at a different price than anticipated or may not be filled in the marketplace.

Disclosure: Tax-Related Circular 230 Notice

The information in this presentation is provided for informational purposes only, and does not constitute tax advice and cannot be used by the recipient or any other taxpayer to avoid penalties under any federal, state, local or other tax statutes or regulations, or to resolve any tax issue.

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