PRIMER RESEARCHQuantitative research for U.S. taxable investors

PRIMER RESEARCH · TAX OPTIMIZATION

Tax Path Dependency

Interactive research demonstration

Problem

Two taxable accounts can follow the same strategy and receive the same signals. If they begin on different dates, they inherit different tax lots, cost bases, holding periods, and wash-sale histories.

The portfolio held today determines the tax opportunities available tomorrow.

Tax optimization is a portfolio-history problem. The value of a trade depends on the state created by every trade that came before it.

Mechanism

I.

Different starts create different lots

Entry dates establish cost bases, holding periods, and the first set of positions.

II.

Tax decisions change the account state

Each harvest, rebalance, and wash-sale restriction alters the next decision set.

III.

The differences compound

Accounts receiving the same current signal can face different tax-efficient trades.

Model

Start one month later. Own a different tax problem.

Interactive modelOpen full screen ↗

Reading

Move the inception-month slider to compare two independently evolving accounts. The model holds the rebalance date, signal, prices, and rules constant, then shows how each account’s inherited tax state changes the usable loss lots and trades available on that date.

The charts show the resulting after-tax wealth paths, the overlap in usable loss-lot names through shared history, and the one-year outcome associated with each inception month.

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