Investments don’t always perform as well as planned, but there are ways to use even laggards in your portfolio to your advantage. Capital allocators sometimes use tax loss harvesting to keep their tax burden in line with market realities. Forest can help you manage those sunk costs strategically.

When assets decline in value or equity markets have a down year, it can impair a business by reducing its reserves and access to financing. If an asset is not expected to bounce back quickly, realizing that loss helps a business free up cash for other opportunities. They can sometimes claim that loss on future tax returns to offset capital gains in other positions. Talk to your CPA or tax advisor to determine if and how this can apply to your situation.

How it works

Forest helps you map out transactions smoothly and accurately. Here’s how you can use it to manage positions with losses:

• Connecting your brokerage accounts and other financial platforms and import your transactions.
• If your platform is not yet integrated with Forest, you can manually import a CSV file of your transactions.
• Forest automatically maps out purchases and sales of individual lots of a position.
• Forest’s double-entry accounting calculates the profit and loss of each sale and the applicable capital gains.
• If a transaction results in a loss, Forest aggregates the amount against the performance of your other sales. You can make tax basis modifications as necessary.
• Once your transactions are complete, generate reports and statements for tax preparation.

You can use Forest as your single source of truth for your double-entry accounting by moving data between applications and integrating with investment platforms such as Addepar.

Plan ahead with entity mapping, dashboards, and reports

Capital allocators and accounting teams need robust tools to structure positions and track capital gains effectively. This is especially true if your organization is working with an umbrella of entities.

Forest provides you with both the high-level overview and the granularity you need to identify securities with losses, and you can map positions across entities for a clear understanding of your return on various investments.

Start with a comprehensive balance sheet and drill down all the way to individual lots for full control. You can share insights across teams by generating reports and analyzing investment dashboards. Together, this approach helps you get proactive with accounting and capital allocation so you can adapt to market changes.

There are silver linings to be found in all kinds of market conditions. With the proper tools and right mindset, you can use tax loss harvesting to your benefit with Forest as your guide.

Are you recognizing some losses right now? Learn how Forest can help you account for them with clarity and precision. Contact us today to schedule a demo.