%0 Journal Article %A Jeffrey E. Horvitz %A Jarrod W. Wilcox %T Tax Management of Stock Portfolios %D 2005 %R 10.3905/joi.2005.479392 %J The Journal of Investing %P 83-89 %V 14 %N 1 %X Most taxable investors and their investment managers probably misunderstand the true value of tax deferral and proper tax lot management. Simulations based on historical S&P 500 returns allow the derivation of estimates of the tax alpha that can be achieved by tax deferral and selective turnover by tax lot. The simulations include realistic details of trading costs, loss carry-forwards, various turnover rates, short-term capital gains, and the estate tax. Long-term capital gains tax deferral is seen to be not very valuable until about the ten-year mark, but the step-up in cost basis at death can make shorter deferral times valuable, even after accounting for the estate tax. The real mechanism of tax deferral makes it more like a partnership with the government than an interest-free loan. These findings, like those of other research, call into question the efficacy of active management for long-term taxable investors. %U https://joi.pm-research.com/content/iijinvest/14/1/83.full.pdf