Never Sell ACN for a Loss
While I made a bold statement in the headline, “Never sell ACN for a loss,” the reality is there are lots of caveats and explanations that make this blanket statement valid (or invalid).
Accenture (ACN) has made an incredible run in the last decade, averaging a remarkable 17% annualized compound return and currently at a 27% return year-to-date in 2021.
You’ve hardly had a chance to sell ACN at a loss, although you might have sold low when COVID spooked the markets in March of 2020 (don’t worry, you weren’t the only MD who did).
Inevitably, we’ll see another market correction at some point. Let’s jump into the details of who should never sell for ACN for a loss and the reason why.
Who should avoid selling ACN for a loss
While everyone at Accenture can acquire shares through the ESPP, VEIP, and/or annual equity awards, the most consistent purchasers of shares are MDs who participate in the VEIP.
The VEIP allows you to make monthly ACN purchases that receive a 50% bonus (100 shares purchased gets a 50 share RSU bonus) that vests in two years after the grant date.
Since Accenture MDs are the only ones with access to the VEIP, they should be the most careful about selling ACN for a loss.
However, anyone who purchases ACN needs to keep in mind the reason not to sell at a loss because they can also be impacted.
Why you should avoid selling ACN for a loss
To understand why you should avoid selling ACN for a loss, we first need to get into the fun topic of taxes.
Specifically, we need to be aware of the IRS “wash-sale rule” for securities.
The wash-sale rule prevents you from taking a tax-deduction on securities sold at a loss if specific standards aren’t met.
Most of the time, if you sell stocks at a loss, the loss can either offset your capital gains for the year, or you can claim the loss (up to $3k) on your tax return.
However, once the wash-sale rule is violated, you can no longer claim the loss or tax deduction immediately. Instead, you have to follow the wash sale rules to increase the basis on the stock purchase that caused the wash (very confusing, I know).
What violates the wash-sale rule
The wash-sale rule is in place to prevent taxpayers from creating artificial losses by quickly buying and selling stocks at a loss (like day-trading).
The wash-sale rule says if you sell a security for a loss, you can’t repurchase a “substantially identical” stock within 30 days before or after the sale.
Essentially, there’s a 61-day window (thirty days before and thirty days after the sale) that disqualifies a stock sold at a loss from getting claimed.
Now let’s connect why you should never sell ACN at a loss.
Accenture equity purchase programs can trigger the wash-sale rule
Every time you purchase ACN through an Accenture equity program, such as the VEIP, ESPP, or the vesting of an annual equity award, you’re at risk of triggering the wash-sale rule.
The rule is a little easier to manage with the ESPP because you’re only making purchases twice a year, and it’s easy with equity award vests because they’re annual.
However, the VEIP program makes it impossible to avoid wash-sales because you make purchases on the fifth of every month! There’s no way to avoid the wash-sale rule if you’re participating in the VEIP.
Obviously, this can’t be specific advice for your situation because there might be times you need the extra cash from a stock sale. You just need to keep in mind you won’t get to claim the loss.
This is just one example of how I help Accenture Execs plan their sales to optimize their cash flow and minimize taxes.
