Suppose you bought some shares at 400k that grew over 6 years at a steady rate of 100k per year to total 1 million. If you sold them after 6 years, you would have a 600k "CGT event", reduced by 50% for owning them more than 12 months, and thus a taxable income that year of 300k, largely allocated in the highest tax bracket. Right?
Alternatively, if after buying the 400k worth you waited 12.001 months (to get the 50% reduction) and then sold it all at 500k before immediately re-buying it all at the same price (500k), you would have a 100k CGT event in that first year, reduced by 50% to a taxable income of 50k, which would mostly be in the lower tax brackets. Repeat this each year for six years and you end up being 'taxed' on the same amount of 300k, but at much lower brackets by spreading it out across the years. If your income/earnings were low enough you could even avoid paying any tax on it at all by being under the ~18k taxable income threshold, whereas if you simply bought and held for decades you could be liable for enormous sums of tax even on very modest year-to-year growth. Am I missing something?
Selling everything and then immediately re-buying it once every 12.001 months seems like the only way to go, so why doesn't everyone do it? Or do they, and I just don't know about it? I must be missing something obvious here, I am very new at this so maybe I don't realize why this doesn't usually apply to people, but it seems like a crazy thing to encourage. Why wouldn't everyone do it this way?