Wash sale rules

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a.koparkar
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Wash sale rules

Post by a.koparkar » Fri Sep 07, 2018 4:47 pm

I bought 100 shares of the same ETF in taxable and tax-deferred accounts on the same day. The ETF price dropped within 2 days of purchase, so I wish to sell (in less than 30 days) only the shares held in the taxable account for TLH.
Wash sale is not allowed when one buys the same security "within 30 days before or after". Would it still be acceptable for TLH since both initial purchase transactions had occurred on the same day?

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Nate79
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Re: Wash sale rules

Post by Nate79 » Fri Sep 07, 2018 5:06 pm

What tax deferred account? Is it an IRA or 401k?

Topic Author
a.koparkar
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Re: Wash sale rules

Post by a.koparkar » Fri Sep 07, 2018 5:07 pm

Nate79 wrote:
Fri Sep 07, 2018 5:06 pm
What tax deferred account? Is it an IRA or 401k?
IRA.

gostars
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Re: Wash sale rules

Post by gostars » Fri Sep 07, 2018 6:11 pm

No. The same day is within the range of 30 days before to 30 days after.

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a.koparkar
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Re: Wash sale rules

Post by a.koparkar » Fri Sep 07, 2018 9:07 pm

gostars wrote:
Fri Sep 07, 2018 6:11 pm
No. The same day is within the range of 30 days before to 30 days after.
I am unsure. The lots in IRA and taxable were bought at the same price, before the price declined. Therefore, the security on which tax loss is taken in taxable was not bought at the new lower price in IRA.
I interpret it as not gaming the system.
Comments, please.

aristotelian
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Re: Wash sale rules

Post by aristotelian » Fri Sep 07, 2018 9:19 pm

a.koparkar wrote:
Fri Sep 07, 2018 9:07 pm
gostars wrote:
Fri Sep 07, 2018 6:11 pm
No. The same day is within the range of 30 days before to 30 days after.
I am unsure. The lots in IRA and taxable were bought at the same price, before the price declined. Therefore, the security on which tax loss is taken in taxable was not bought at the new lower price in IRA.
I interpret it as not gaming the system.
Comments, please.
Your intention is irrelevant. The IRA shares were purchased within 30 days before or after, so it's a wash. If you were selling for other than tax purposes, you would not keep the same investment in the IRA. The fact that you are holding the shares in your IRA kind of proves that you are only selling in the taxable account in order to harvest the loss. If you want to harvest the loss, I believe you would need to sell the shares in the IRA as well.

student
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Re: Wash sale rules

Post by student » Fri Sep 07, 2018 9:34 pm

Why would you sell in taxable and not sell in IRA? I don't understand the advantages.

livesoft
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Re: Wash sale rules

Post by livesoft » Fri Sep 07, 2018 9:35 pm

The OP's scenario is a wash sale. It is right there in IRS Publication 550 as an example of wash sale. The loss from selling in taxable is disallowed.
Last edited by livesoft on Fri Sep 07, 2018 9:37 pm, edited 1 time in total.
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grabiner
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Re: Wash sale rules

Post by grabiner » Fri Sep 07, 2018 9:36 pm

a.koparkar wrote:
Fri Sep 07, 2018 9:07 pm
gostars wrote:
Fri Sep 07, 2018 6:11 pm
No. The same day is within the range of 30 days before to 30 days after.
I am unsure. The lots in IRA and taxable were bought at the same price, before the price declined. Therefore, the security on which tax loss is taken in taxable was not bought at the new lower price in IRA.
The wash sale rule does not care whether you would have a gain or loss on the replacement shares, only that they exist. You have a wash sale if:

You sold a security for a capital loss, and
Within 30 days before or after the sale, you bought the security or a substantially identical security.

Fairmark's discussion deals with the issue of whether shares could be considered replacement shares. If you bought 200 shares all at once, and sold 100 of them, you should not have a wash sale. If you bought 200 shares in two separate purchases of 100, and sold one of the blocks, you probably do (Fairmark's example 3).

The other situation which the IRS has not resolved is whether you can avoid a wash by selling the shares that would have created the wash before you sell for the loss; logically, you shouldn't have a wash because shares that you already sold cannot be replacement shares. As an example which shows why a wash is not logical, suppose that you bought a block of shares on December 17, bought another block on December 24, sold the December 17 shares for break-even on December 31, and sold the December 24 shares for a loss on January 7. If the January 7 sale is a wash sale with the December 17 purchase, the wash sale would push the capital loss back to the December 17 shares, and thus you would deduct the capital loss in the year before you incurred it. But the IRS is not always governed by logic; if you want to do this, consult your tax advisor.
Wiki David Grabiner

Topic Author
a.koparkar
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Re: Wash sale rules

Post by a.koparkar » Sat Sep 08, 2018 4:09 pm

grabiner, Thanks for the reference to fairmark.com page.

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