(Unfortunate) TLH opportunity (like bugs out of the woodwork)

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ThisTimeItsDifferent
Posts: 247
Joined: Sat Jan 31, 2015 2:51 pm

(Unfortunate) TLH opportunity (like bugs out of the woodwork)

Post by ThisTimeItsDifferent » Sun Dec 20, 2015 12:51 pm

How does one tax loss harvest from funds at one mutual fund company (T Rowe Price) to a better, lower cost, more tax efficient, passive fund or set of funds at another (Vanguard Total Stock market VTSAX), staying in the market as much as possible?
Sell (using SpecID) put in a new sweep/money market fund?
Call or chat or Vanguard and have them pull from the other company's money market account?
Do I need to add the source company's account as an external account?
Do I have to accept that the money would be out of the market for a few days?

Markets can go up or down dramatically (multiple %) in single days. While I would like to avoid the big down % days and only be in for big up % days like anyone else (not in a short position) would, I cannot predict which will be when and just want to stay in.

I'm debating whether to sell/transfer enough to realize the maximum loss to reduce taxes, or to sell enough to make the realized CG basically 0 and pay the taxes on the current year's distribution out of other income, or to liquidate the whole thing (doubtful since AMT would still apply including the exemption phase out).

I have considered this for a while anyway, and now that my cost basis is higher, there's less tax impact reason not to.

Recently, when the SP500/Dow went declined 3%, T Rowe Price equity income fund PRFDX NAV declined by 7.5% ($2.27/share but 1.40/share of that was a distributed CG) that one day. It went down as much as the broader market, but distributed a high taxable gain. Over the past few years it has under-performed a broader index, but distributed most of the gains. It distributed 5% of its total value this year. YUK.
Recently, the T Rowe Price Small Cap Value PRSVX declined by 19% ($8.46/share but 7.40/share was a distributed CG). It distributed 20% of its total value this year. YUK

These have been long term (20+ years) consistently contributed accounts/funds.Because they are are so tax-inefficient, I have been paying taxes all along and have a smaller unrealized gain than 20 years of contributions would otherwise imply. When i started, I wasn't much aware of tax efficiency. At least the LTCG tax rate is lower than earned rates rates (except for AMT considerations). My other investments in taxable, 401k and IRAs are more tax efficient and mostly passive total market index funds.

Thanks. This is such a useful site with such helpful contributors.

DSInvestor
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Joined: Sat Oct 04, 2008 11:42 am

Re: (Unfortunate) TLH opportunity (like bugs out of the woodwork)

Post by DSInvestor » Sun Dec 20, 2015 12:56 pm

If you have cash outside of TRP, you can use that to minimize the time out of market. For example, you have $30K fund at TRP with a loss and you have 30K cash. If you place two mutual fund trades to buy and sell on the same day, you will not be out of the market.

1. Sell 30K fund at TRP
2. Buy 30K tax efficient fund at an other firm.

If you have large accounts, it may take time to do this as you will need to wait for settlement times and/or hold periods on your bank for ACH deposits.
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livesoft
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Re: (Unfortunate) TLH opportunity (like bugs out of the woodwork)

Post by livesoft » Sun Dec 20, 2015 1:01 pm

You could sell at TRP and buy at Vanguard the same day if you tell Vanguard to pull from your emergency fund. Then when TRP clears, replenish your emergency fund.

Or move emergency fund to Vanguard money market fund first.

Or sell at TRP and buy a Vanguard ETF the same day paying the TRP commission for the ETF.

It will feel good to get this done.
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victork
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Re: (Unfortunate) TLH opportunity (like bugs out of the woodwork)

Post by victork » Mon Dec 21, 2015 6:40 am

I think that you can have a Brokerage Fund at Vanguard that will hold investments from other fund companies.
Ask Vanguard to move the fund from TRP "in kind", and you will have the shares at Vanguard.
Then, I expect that Vanguard will let you sell the fund and buy another fund on the same day, so long as you don't try to take money out of Vanguard before everything settles.

Topic Author
ThisTimeItsDifferent
Posts: 247
Joined: Sat Jan 31, 2015 2:51 pm

Re: (Unfortunate) TLH opportunity (like bugs out of the woodwork) and wash-sale

Post by ThisTimeItsDifferent » Mon Dec 28, 2015 11:08 am

Maybe this should be a new post...

Is there a good/recommended wash sale calculator?

Unfortunately, I still had distributions re-invested so I may be in wash sale situation, which would reduce or disallow claiming some of the losses today. Both of my TRP funds had large distributions this December which resulted in large taxable gains, but were reinvested in additional share purchases.

I think the wash sale occurs even if I use specified ID.
If I sell the shares purchased in December this year, I cannot claim a loss on those specific shares? (or)
If I sell the shares purchased in December this year, I cannot claim a loss on that number of shares? but on which ones (first in, last in, specified)?

And for the disallowed losses, normally those losses are added to the basis of other shares to be realized when they are sold.
Which other shares are those losses added to? Can I choose? Is it first in, last in?
Can the losses be added to the basis of (other) shares sold at the same time?
Can the losses be added to the basis of (other) shares sold at a different date within 30 days of the previous purchase?
Can the losses be added to the basis of (other) shares sold at a different date within 30 days of the first sale?

In my synthetic example below, I would like to sell the shares purchased in 2012-2015 for a cost basis of $43000 and a sale price of $40000, resulting in a claimable loss of $3000. I think the 1000 shares purchased on 12/2015, even if they don't have a loss, disallow some part and $ of the otherwise $3000 claimable loss.
Which lot would that disallow/postpone, the loss on? Could I use the loss on a different lot of the sale?

(how can one include something in chart format?)
buy
---date---- share sh$ tot.$ cumu. $ cumu. sh avg cost
1/1/2005 1000 $1 $1,000 $1,000 1000 $1.00
1/1/2006 1000 $2 $2,000 $3,000 2000 $1.50
1/1/2007 1000 $3 $3,000 $6,000 3000 $2.00
1/1/2008 1000 $4 $4,000 $10,000 4000 $2.50
1/1/2009 1000 $5 $5,000 $15,000 5000 $3.00
1/1/2010 1000 $6 $6,000 $21,000 6000 $3.50
1/1/2011 1000 $8 $8,000 $29,000 7000 $4.14
1/1/2012 1000 $10 $10,000 $39,000 8000 $4.88
1/1/2013 1000 $12 $12,000 $51,000 9000 $5.67
1/1/2014 1000 $11 $11,000 $62,000 10000 $6.20
12/15/2015 1000 $10 $10,000 $72,000 11000 $6.55

sell
12/30/2015 4000 $10 $40,000

livesoft
Posts: 69615
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Re: (Unfortunate) TLH opportunity (like bugs out of the woodwork)

Post by livesoft » Mon Dec 28, 2015 11:44 am

Have you studied this wash sale thread with calculations:
viewtopic.php?t=179414
I think it answers most of your questions.

There is no wash sale calculator that I am aware of: viewtopic.php?t=179751
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