Need a tax buff who understands TLH'ing

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Offshore
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Need a tax buff who understands TLH'ing

Post by Offshore » Thu Mar 22, 2018 9:12 am

Regarding Tax-Exempt Bond Funds, our Wiki says:

"If you sell shares of a mutual fund at a loss, and those shares have been held for 6 months or less, then there are special rules that may alter the loss you claim. First, if those shares produced any tax-exempt interest, then the loss is reduced, dollar for dollar, by that interest. Second, if those shares were held while the fund distributed (long term) capital gains, then the loss is treated as a long term loss up to the dollar amount of the distribution those shares produced.[1][2] Note that most Vanguard Tax Exempt funds (and others like them) are not subject to the preceding 6 month rule because of the way they accrue and pay out interest (dividends). The 6 month rule for tax exempt interest comes from 26 U.S. Code § 852(b)(4)(B), but there is an exception in 852(b)(4)(E) for funds that declare dividends daily and pay them monthly or more frequently.[3] [4]"

I sold a VG tax-exempt bond fund in February to TLH. It pays dividends monthly. Vanguard told me the tax-exempt bond fund I sold accrued dividends daily and paid dividends monthly. Do I need to do any special calculations for TLH'ing this sale on my 2018 return?

Many thanks :happy

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BolderBoy
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Re: Need a tax buff who understands TLH'ing

Post by BolderBoy » Thu Mar 22, 2018 12:50 pm

Offshore wrote:
Thu Mar 22, 2018 9:12 am
Do I need to do any special calculations for TLH'ing this sale on my 2018 return?
No.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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Offshore
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Re: Need a tax buff who understands TLH'ing

Post by Offshore » Thu Mar 22, 2018 2:56 pm

BolderBoy,
Thanks!

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grabiner
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Re: Need a tax buff who understands TLH'ing

Post by grabiner » Thu Mar 22, 2018 8:47 pm

Offshore wrote:
Thu Mar 22, 2018 9:12 am
but there is an exception in 852(b)(4)(E) for funds that declare dividends daily and pay them monthly or more frequently.[3] [4]"

I sold a VG tax-exempt bond fund in February to TLH. It pays dividends monthly. Vanguard told me the tax-exempt bond fund I sold accrued dividends daily and paid dividends monthly.
This meets the exemption criterion.

If you reinvested dividends in February on your remaining holdings, or reinvested in January and didn't sell the shares purchased with reinvested dividends, you will still have to adjust for the wash sale.
Wiki David Grabiner

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Offshore
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Re: Need a tax buff who understands TLH'ing

Post by Offshore » Sat Mar 24, 2018 4:47 pm

grabiner,

I recognized the issue you identified ahead of the sale, and shifted dividends to a MM fund. So, the sale was every outstanding share with no reinvested dividends after liquidation. I appreciate your comment. Thank you.

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