Friday, July 19, 2013

Recent Sells

Well I've been active this past week in trying to unload some shares of Halliburton (HAL) which is my employer.  I purchased the shares through the employee stock purchase plan and I believe that if one is offered at your employer and you get a sizable discount you should participate if possible.  Just don't go overboard and allocate too much capital to your employer's shares because they're also your source of income.  And if hard times fall on the company you could be left with no job and investments that are dropping like a rock.  If my wife and I weren't planning on purchasing our first home together during the second half of the year, I'd be a bit more strategic with unloading the shares by selling call options.  But I'm not blessed with the luxury of time right now and the 2 sales represented solid gains.

On Thursday, July 18th I sold 72 shares of HAL for $44.81 each.  These shares came from the most recent lot of my ESPP purchase that just went through on July 1st.  And then earlier this morning I sold 50 more shares for $45.76 each.  Unfortunately all of these sales will be disqualifying dispositions and short term capital gains.  This is when the time luxury can really help since you can plan better to get the best tax situation.  I need the money and I'm already overweight my employer's stock anyways so it was a good time in that sense.  Since I have 3 call options that are most likely going to be executed, meaning my shares will be called away from me, I wanted to make sure I was getting long-term capital gains on those since they carry lower cost basis'.  I expect that my wife and I will be in the 28% bracket this year which is a double whammy since we will be crossing over to the next bracket.  While some complain about that, I have no issues since it means I'm making more money and still bringing in more after taxes.

ESPP taxation is ridiculous and way more complicated than normal buys and sells.  A portion of your gains is counted as income, the rest is capital gains and then there's different calculations based on certain holding requirements being met.  I'm going to just run through the results of how the taxation process is done but a more detailed explanation can be found here.  I'm still working on getting a spreadsheet up so you can run through the calculations yourself, hopefully next week.

For the first sale at $44.81 where I sold 72 shares, here's the relevant data.

Grant Date: 4/1/2013
Purchase Date: 6/28/2013
Sale Date: 7/18/2013
Shares: 72
Grant Price: $39.93
Purchase Price: $41.72
Discounted Purchase Price: $33.94
Sale Price: $44.81
Commission Paid: $8.01

Since I sold the shares less than 1 year after purchase and less than 2 years after the grant date, this is a disqualifying disposition with short-term capital gains.  When I file my taxes next year, I'll have to report $560.12 in additional income and $214.47 as short-term capital gains.

The sale this morning actually came from 2 lots and I'm pro-rating the commission based on the portion of shares.  Not sure how the taxes will work out when I file, but this is good enough for me to show the difference.

Grant Date: 4/1/2013
Purchase Date: 6/28/2013
Sale Date: 7/19/2013
Shares: 0.982
Grant Price: $39.93
Purchase Price: $41.72
Discounted Purchase Price: $33.94
Sale Price: $44.81
Commission Paid: $0.16

Additional income will be reported as $7.64 and there will be $3.81 in short-term capital gains.

Grant Date: 1/2/2013
Purchase Date: 3/28/2013
Sale Date: 7/19/2013
Shares: 49.018
Grant Price: $35.71
Purchase Price: $40.41
Discounted Purchase Price: $30.35
Sale Price: $45.76
Commission Paid: $7.83

Additional income will be $492.95 and there will be $254.41 in short-term capital gains.

I've updated my FI Portfolio to reflect these sales.  Sadly this has lowered my forward 12-month dividends to $3,032.35.  That's okay though because my employer isn't exactly a dividend growth company.

*I've added a spreadsheet you can use to input your own numbers and the income and capital gains amounts are calculated for you.

No comments:

Post a Comment