tax loss harvesting

This is from CFAI material question 21, pg 274

summary: securities worth 50,000. cost basis 75000. tax rate 30%.

therefore tax savings in the current year is 7500.

in the next question they say that Mr D sells securities in the current tax year and replaces them with identical securities. He will then sell the new securities in the next year. therefore the total tax savings assuming he does not reinvest the tax savings is zero. How is it zero? dint he save 7500 in the 1st year?

He actually saved 7,500 in the 1st year but since he replaced them in the current year, the cost basis of the new securities became 50,000.

Thus, if these securities appreciate and he sells them in the next year he will bear a capital gain tax.

does reinvesting tax savings mean using the tax savings to buy identical securities? so will he buy identical sec for 57500 and not 50000?

looks like i’m missing something


  1. “What is the total tax savings assuming DiCenzo does not reinvest the tax savings?”