Tax Loss Harvesting in a fund with IRA?

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Tax Loss Harvesting in a fund with IRA?

Postby fishdrzig » Sat Jun 29, 2013 8:48 am

Sorry if this is a stupid question but for any account that ends in IRA i.e. Simple IRA, Rollover IRA, Roth IRA, Rollover Account Brokerage IRA etc..... is it true that one cannot implement tax loss harvesting?
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Re: Tax Loss Harvesting in a fund with IRA?

Postby Sidney » Sat Jun 29, 2013 9:02 am

yes, that's correct
I always wanted to be a procrastinator.
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Re: Tax Loss Harvesting in a fund with IRA?

Postby livesoft » Sat Jun 29, 2013 9:05 am

No it is not true, BUT ...

it is not done in the standard way and has special requirements:

1. You must sell ALL your IRA assets (even if held at multiple custodians), so gains in one asset would then offset losses in others. You will need a net loss.
2. You can then deduct the net loss as a miscellaneous deduction subject to a 2% floor of AGI on Schedule A if you itemize.

These 2 requirements are usually so onerous that no one can use them. That is, you have to have a net loss loss for the sum of all your IRA assets of more than 2% of your AGI to do this. The same criteria can be used to tax-loss harvest a 529 plan which I have done.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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Re: Tax Loss Harvesting in a fund with IRA?

Postby Sidney » Sat Jun 29, 2013 9:43 am

I had forgotten the nuclear option. It is such a draconian move that it isn't practical for most people.
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Re: Tax Loss Harvesting in a fund with IRA?

Postby Epsilon Delta » Sat Jun 29, 2013 10:38 am

livesoft wrote:No it is not true, BUT ...

it is not done in the standard way and has special requirements:

1. You must sell ALL your IRA assets


To clarify, you need to withdraw all your IRA assets. It's not enough to sell the asset and leave the cash in the IRA, the IRA balance has to go to zero.
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Re: Tax Loss Harvesting in a fund with IRA?

Postby TomatoTomahto » Sat Jun 29, 2013 12:03 pm

It's probably in the Guinness Book of World Records if anyone has actually done this.
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