Changing from Average Cost basis to Spec ID

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jj
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Joined: Sun Mar 04, 2007 9:44 am
Location: Texas

Changing from Average Cost basis to Spec ID

Post by jj » Wed Jun 20, 2018 8:51 am

I have had a position in Limited Term Tax Exempt munis (VMLUX) since 2003, over the years there have been sales all at average cost basis.

If I sell the whole position, I have a small loss <$10,000, and then buy the same fund back again in 31 days+ can I then start over again with Spec ID?

I'm not sure if the IRS rules allow a change like this.

Thanks, jj
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett

AlohaJoe
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Re: Changing from Average Cost basis to Spec ID

Post by AlohaJoe » Wed Jun 20, 2018 9:03 am

When you googled it, what were the results?

jj
Posts: 191
Joined: Sun Mar 04, 2007 9:44 am
Location: Texas

Re: Changing from Average Cost basis to Spec ID

Post by jj » Wed Jun 20, 2018 10:24 am

AlohaJoe wrote:
Wed Jun 20, 2018 9:03 am
When you googled it, what were the results?
This precise situation is not addressed anywhere - that's why I'm asking here. If I made a partial sale I would have to continue with average cost basis. If closing out the whole position and starting again after a period of time, is it still the case that average cost basis must be used?
...it is madness to risk losing what you need in pursuing what you simply desire. Warren E. Buffett

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House Blend
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Re: Changing from Average Cost basis to Spec ID

Post by House Blend » Wed Jun 20, 2018 10:44 am

Yes you can do this, and yes I would do it.

* You get a harvested loss of $10,000
* You eliminate all of your non-covered and averaged shares

Win win.

You could switch from Average Basis to Spec ID today, without any sales, but it wouldn't alter the fact that you have old purchases whose costs are averaged together.

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BolderBoy
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Re: Changing from Average Cost basis to Spec ID

Post by BolderBoy » Wed Jun 20, 2018 12:00 pm

jj wrote:
Wed Jun 20, 2018 8:51 am
If I sell the whole position, I have a small loss <$10,000, and then buy the same fund back again in 31 days+ can I then start over again with Spec ID?

I'm not sure if the IRS rules allow a change like this.
I don't know what the IRS rules say, but I've done exactly this and Vanguard allowed it.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

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