DRIP and Wash Sale Rule

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unprovoked
Posts: 3
Joined: Wed Mar 18, 2015 11:15 am

DRIP and Wash Sale Rule

Post by unprovoked » Wed Mar 18, 2015 11:35 am

I received a large unexpected dividend from a mutual fund today which was automatically reinvested with DRIP. The old shares (prior to the DRIP, all held for more than 3 months) have a net loss. The new shares from the DRIP don't have any gain or loss yet, since they were purchased today.

If I want to sell *all* of my holdings in the fund, the recent DRIP will trigger the 30 day wash sale rule. My questions:

1) If I sell all of my shares in one transaction, does the wash sale rule only affect the new shares? Or will the net loss on the old shares be disallowed as well?

2) Would it be safer to sell my position in two separate transactions: a) First, sell all of the old shares - clearly no wash sale rule on these. b) The next day, sell off all of the remaining (new) shares from the DRIP. If there is any gain or loss from this second sale, it will be minimal since the shares were just acquired today.

Thank you for your advice.

unprovoked
Posts: 3
Joined: Wed Mar 18, 2015 11:15 am

Re: DRIP and Wash Sale Rule

Post by unprovoked » Wed Mar 18, 2015 2:41 pm

After some reading, I think that if I sell my entire position, the wash sale is not relevant.

I've never encountered wash sales before, so I'm not 100% sure if this is correct: If wash sales defer the loss to a future time when the replacement shares are sold, since there are no replacement shares if I sell my entire position, there is no wash sale in this case (as long as I don't purchase a substantially similar security within 30 days, which I won't).

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happymob
Posts: 545
Joined: Wed Nov 18, 2009 4:09 pm

Re: DRIP and Wash Sale Rule

Post by happymob » Wed Mar 18, 2015 3:52 pm

If you sell everything, you'll be ok as long as you don't repurchase within 30 days.

unprovoked
Posts: 3
Joined: Wed Mar 18, 2015 11:15 am

Re: DRIP and Wash Sale Rule

Post by unprovoked » Thu Mar 19, 2015 9:27 am

Thank you for your reply!

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