In the UK this is now disallowed and is known as "bed and breakfasting." It was especially prevalent in the derivatives market. If you trade in the underlying it will be an income loss and not be available for set-off agains CGT. In SA, short term "short" positions have been allowed as "capital" items where they were proven to be motivated by the need to hedge a long term ("capital") portfolio. This would tend to indicate that this is the preferred method of protecting a portfolio. Selling and re-entering is, at the end of the day, short term trading on the short side. GET proper advice form your tax advisor. Granted, they tend to know very little; so maybe you should go and see a tax attorney with one of the bigger law firms.