TLH Help

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Topic Author
poker27
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TLH Help

Post by poker27 » Wed Dec 12, 2018 2:07 pm

Hi,

So I have been unsuccessfully reading on TLH...

Like many I buy both VFWAX and VTSAX every month in separate buys. As of late my overall position of VFWAX is down nearly $9k, and im sure several of my VTSAX are down as well.

Given these are bought over several different 'buys' how do I take advantage of TLH? Should I just sell my overall VFWAX position? Or is there a way to see 'what' is down, and sell those portions?

Thanks!

livesoft
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Re: TLH Help

Post by livesoft » Wed Dec 12, 2018 2:10 pm

Change your cost basis method to Specific Identification. Wait until your broker does that and confirms.

Sell the lots are that colored red.

It is really that simple.
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rkhusky
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Re: TLH Help

Post by rkhusky » Wed Dec 12, 2018 3:09 pm

And when you sell all the "red" shares, you might also want to sell all shares bought within the past 30 days, whether or not they have losses.

And don't buy anything substantially identical to the fund(s) that you sell for 30 days afterward.

international001
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Re: TLH Help

Post by international001 » Wed Dec 12, 2018 4:40 pm

Why sell the ones you bought in the last 30 days?

And why buy the 2 funds at the same time? Then you cannot sell one and buy the other the next day. I thought that was the whole point

rkhusky
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Re: TLH Help

Post by rkhusky » Wed Dec 12, 2018 10:48 pm

international001 wrote:
Wed Dec 12, 2018 4:40 pm
Why sell the ones you bought in the last 30 days?

And why buy the 2 funds at the same time? Then you cannot sell one and buy the other the next day. I thought that was the whole point
Because of wash sale rules. If you sell for a loss and want to claim the loss on your taxes, it will be disallowed if you have purchased a substantially identical replacement within +- 30 days of the sale. If the purchase is in a tax-advantaged account, the loss is permanently disallowed. If the purchase is in a taxable account, the disallowed loss is added to the basis of the replacement shares, so you can recover the loss when you sell the replacement shares.

Topic Author
poker27
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Re: TLH Help

Post by poker27 » Wed Dec 12, 2018 11:04 pm

rkhusky wrote:
Wed Dec 12, 2018 10:48 pm
[quote=international001 post_id=4255813 time=<a href="tel:1544650838">1544650838</a> user_id=131025]
Why sell the ones you bought in the last 30 days?

And why buy the 2 funds at the same time? Then you cannot sell one and buy the other the next day. I thought that was the whole point
Because of wash sale rules. If you sell for a loss and want to claim the loss on your taxes, it will be disallowed if you have purchased a substantially identical replacement within +- 30 days of the sale. If the purchase is in a tax-advantaged account, the loss is permanently disallowed. If the purchase is in a taxable account, the disallowed loss is added to the basis of the replacement shares, so you can recover the loss when you sell the replacement shares.
[/quote]

Thanks for the info, I was unaware that the 30 day rule went both ways...

I really don’t want to ‘clutter’ my Vanguard account with more funds, by buying another total international similar fund. But at the same time, I would prefer not to be uninvested for 30 days. What do most do?

rkhusky
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Re: TLH Help

Post by rkhusky » Thu Dec 13, 2018 8:26 am

poker27 wrote:
Wed Dec 12, 2018 11:04 pm
I really don’t want to ‘clutter’ my Vanguard account with more funds, by buying another total international similar fund. But at the same time, I would prefer not to be uninvested for 30 days. What do most do?
Most buy something that is close, but not substantially identical, like Total International (VTIAX). Unfortunately, that means a fund that you might have to hold for a long time, if it goes up after you do your TLH and you don't want to incur capital gains.

If you are not TLH'ing VTSAX, you could buy it (or another fund that you already own). It is not an international fund, but its returns will likely be closer to VFWAX than a bond fund or a money market fund.

You just have to decide on the order of importance of: maintaining your stock/bond ratio, maintaining your US/Int'l ratio, and limiting the number of funds.

international001
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Re: TLH Help

Post by international001 » Thu Dec 13, 2018 11:06 am

rkhusky wrote:
Wed Dec 12, 2018 10:48 pm
international001 wrote:
Wed Dec 12, 2018 4:40 pm
Why sell the ones you bought in the last 30 days?

And why buy the 2 funds at the same time? Then you cannot sell one and buy the other the next day. I thought that was the whole point
Because of wash sale rules. If you sell for a loss and want to claim the loss on your taxes, it will be disallowed if you have purchased a substantially identical replacement within +- 30 days of the sale. If the purchase is in a tax-advantaged account, the loss is permanently disallowed. If the purchase is in a taxable account, the disallowed loss is added to the basis of the replacement shares, so you can recover the loss when you sell the replacement shares.
I understand wash sale, but no what you are saying
Assume only a taxable account if you buy on day 1, shares go down, and sell on day 15, sale is disallowed. You have to sell on day 31

international001
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Re: TLH Help

Post by international001 » Thu Dec 13, 2018 11:10 am

rkhusky wrote:
Thu Dec 13, 2018 8:26 am
poker27 wrote:
Wed Dec 12, 2018 11:04 pm
I really don’t want to ‘clutter’ my Vanguard account with more funds, by buying another total international similar fund. But at the same time, I would prefer not to be uninvested for 30 days. What do most do?
Most buy something that is close, but not substantially identical, like Total International (VTIAX). Unfortunately, that means a fund that you might have to hold for a long time, if it goes up after you do your TLH and you don't want to incur capital gains.

If you are not TLH'ing VTSAX, you could buy it (or another fund that you already own). It is not an international fund, but its returns will likely be closer to VFWAX than a bond fund or a money market fund.

You just have to decide on the order of importance of: maintaining your stock/bond ratio, maintaining your US/Int'l ratio, and limiting the number of funds.
My new strategy is more loose

Let's say I have both TM and SCV. I only sell when there is a big drop and both go down at the same time (let's say >5%)
day 1 I sell TM and buy SCV
day 31 O sell SCV and buy TM

Hopefully the stock won't recover in 30 days
This works if you do tilting have enough correlated funds (TM, LC, MC, SC, etc)

livesoft
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Re: TLH Help

Post by livesoft » Thu Dec 13, 2018 12:29 pm

international001 wrote:
Thu Dec 13, 2018 11:06 am
Assume only a taxable account if you buy on day 1, shares go down, and sell on day 15, sale is disallowed. You have to sell on day 31
This is a common misconception.

1. Sale is not disallowed.

2. It is not a wash sale.

3. You can sell anytime you want and not have a wash sale as long as you don't have any remaining shares purchased in the previous 30 days or buy new shares in the subsequent 30 days. Example:

Ex 1: Buy on day 1, shares go down, and sell on day 15. Sale is allowed and no wash sale.

Ex 2: Buy on day 1, shares go down in the next hour, and sell on day 1. Sale is allowed and no wash sale.

Ex 3: Buy on day -35. Buy again on day 1, shares go down in the next hour, so sell the same shares just bought right away on day 1. Sale is allowed and no wash sale.
Last edited by livesoft on Thu Dec 13, 2018 12:41 pm, edited 1 time in total.
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travelogue
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Re: TLH Help

Post by travelogue » Thu Dec 13, 2018 12:40 pm

Thank you for this discussion. I'd somehow missed that a wash-sale is triggered for purchases in the thirty days *before* the sale (as well as after), so this is an important gotcha to be aware of.

rkhusky
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Re: TLH Help

Post by rkhusky » Thu Dec 13, 2018 1:08 pm

livesoft wrote:
Thu Dec 13, 2018 12:29 pm
Ex 1: Buy on day 1, shares go down, and sell on day 15. Sale is allowed and no wash sale.

Ex 2: Buy on day 1, shares go down in the next hour, and sell on day 1. Sale is allowed and no wash sale.

Ex 3: Buy on day -35. Buy again on day 1, shares go down in the next hour, so sell the same shares just bought right away on day 1. Sale is allowed and no wash sale.
Assuming there were no other purchases within +-30 days of the sale that could be considered replacement shares.

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Earl Lemongrab
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Re: TLH Help

Post by Earl Lemongrab » Thu Dec 13, 2018 3:24 pm

poker27 wrote:
Wed Dec 12, 2018 11:04 pm
I really don’t want to ‘clutter’ my Vanguard account with more funds, by buying another total international similar fund. But at the same time, I would prefer not to be uninvested for 30 days. What do most do?
You could keep the proceeds in a MMF, and over in an IRA exchange some bonds for your similar fund. Then you won't be "stuck" with it if it goes up, because there's no tax due for IRA transactions. You can then buy the original fund in taxable after 30 days and exchange back out of the temporary replacement. Of course, if that went down you missed a chance for a double-dip TLH, but that's the chance you take.

international001
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Re: TLH Help

Post by international001 » Tue Dec 18, 2018 5:35 am

rkhusky wrote:
Thu Dec 13, 2018 1:08 pm
livesoft wrote:
Thu Dec 13, 2018 12:29 pm
Ex 1: Buy on day 1, shares go down, and sell on day 15. Sale is allowed and no wash sale.

Ex 2: Buy on day 1, shares go down in the next hour, and sell on day 1. Sale is allowed and no wash sale.

Ex 3: Buy on day -35. Buy again on day 1, shares go down in the next hour, so sell the same shares just bought right away on day 1. Sale is allowed and no wash sale.
Assuming there were no other purchases within +-30 days of the sale that could be considered replacement shares.
Thanks for the clarification
So I understand that you don't have to buy anything 'extra' of what you are selling
If you buy day 1 10 stocks at $100, sell on day 10 5 stocks at $90, sell on day 15 5 stocks at $80 -> no disallowed sale
If you buy day 1 10 stocks at $100, sell on day 10 5 stocks at $90, buy 1 stock on day 12 at any price, sell on day 15 5 stocks (of the ones bought on day 1) at $80 -> disallowed sale (but not sure if the one on day 10 or the one on day 15)

Also, going back to your original strategy, why did you want to sell the stocks (bought in the last 30 days) both with gains and losses? Why not only the ones with losses?

livesoft
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Re: TLH Help

Post by livesoft » Tue Dec 18, 2018 6:01 am

I am going to recommend that you widen your reading of the wash sale and get more information from non-Bogleheads sources. Here are two places with additional information:

www.irs.gov
www.fairmark.com

But there are others. Often a different perspective is very helpful.
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rkhusky
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Re: TLH Help

Post by rkhusky » Tue Dec 18, 2018 7:31 am

international001 wrote:
Tue Dec 18, 2018 5:35 am
Also, going back to your original strategy, why did you want to sell the stocks (bought in the last 30 days) both with gains and losses? Why not only the ones with losses?
Because they can be considered replacement shares and cause a wash sale. Check out the fairmark site for example situations and some of the fine details regarding wash sales.

international001
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Re: TLH Help

Post by international001 » Thu Dec 20, 2018 7:10 pm

Thanks for the fairmark site. Lots of of good info.
Yes, I guess the 'replacement' stock has to be identified. Simple scenarios are fine, but it could get complicated. Specially if you don't use specific id method

Do we know if all brokerages identify them the same way?

For my Vanguard account, is there a way of knowing which funds/ETFs have losses? I usually have to pretend a sale by specific ID and check my options.

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