(Another...) TLH Tax Loss Harvesting question T Rowe Price

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Topic Author
ThisTimeItsDifferent
Posts: 246
Joined: Sat Jan 31, 2015 2:51 pm

(Another...) TLH Tax Loss Harvesting question T Rowe Price

Post by ThisTimeItsDifferent » Mon Dec 31, 2018 2:40 am

I am (or may be) helping someone with TLH Tax Loss Harvesting at T Rowe Price.

The investor (unfortunately) has the same T Rowe Price mutual fund in a taxable account and an IRA and (unfortunately) has dividend/gain reinvestment enabled in the IRA and (unfortunately) this IRA mutual fund had a relatively sizable distribution reinvested in December.... And it is the last trading day of the year....

I understand one could have sold/exchanged all the IRA shares for another fund previously, and then there would have been no wash sale, but that didn't happen.

If one sells all IRA shares and some taxable shares for a loss (at T Rowe Price) --on the same day--, then is there a wash sale and a permanently disallowed capital loss on the taxable shares sold at a loss?

If all the IRA shares are treated as sold last, then they get the higher cost basis and the matching loss on the taxable sale is permanently disallowed, right?

If all the IRA shares are treated as sold first, then there is no wash sale or lost capital loss, right?

Can one specify the order of mutual fund sales at T Rowe Price (or with the IRS) on the same day, when everything is done at end of day NAV?

I have read that if one sells multiple lots at Vanguard on the same day, then Vanguard still sometimes assigns a wash sale, which could prevent the capital loss being recognized if the basis change applies to the IRA shares.

If there is a measurable risk of this at T Rowe Price, then I will just tell the other person that loss harvesting is not available.

Thanks!!!!

livesoft
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Joined: Thu Mar 01, 2007 8:00 pm

Re: (Another...) TLH Tax Loss Harvesting question T Rowe Price

Post by livesoft » Mon Dec 31, 2018 6:30 am

ThisTimeItsDifferent wrote:
Mon Dec 31, 2018 2:40 am
I have read that if one sells multiple lots at Vanguard on the same day, then Vanguard still sometimes assigns a wash sale, which could prevent the capital loss being recognized if the basis change applies to the IRA shares.

If there is a measurable risk of this at T Rowe Price, then I will just tell the other person that loss harvesting is not available.

Thanks!!!!
I think TLH is possible, just not on 12/31/2018.
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Topic Author
ThisTimeItsDifferent
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Re: (Another...) TLH Tax Loss Harvesting question T Rowe Price

Post by ThisTimeItsDifferent » Mon Dec 31, 2018 9:13 am

Thanks livesoft. I think you are right that it is not feasible this year as it is the last day. I don't want to take the chance of losing the capital loss tax savings permanently due to basis being assigned to the IRA sales. Your expertise is always appreciated.

In general, does the IRS treat sales of mutual funds on the same day, done at end of day NAV, as the same time, or what are rules to determine order?

What about if they are ETF's and executed at different times on the same day? Just curious.

livesoft
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Re: (Another...) TLH Tax Loss Harvesting question T Rowe Price

Post by livesoft » Mon Dec 31, 2018 9:16 am

Nobody knows what the IRS does --- not even the IRS.

As for the ETF timing thing, I can only say that the IRS forms and the 1099-Bs do not show time of day --- only the date.
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Earl Lemongrab
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Re: (Another...) TLH Tax Loss Harvesting question T Rowe Price

Post by Earl Lemongrab » Mon Dec 31, 2018 5:03 pm

Livesoft's right. Really, the "if you sell in the IRA before selling in taxable there's no wash sale" is more a matter of faith on Bogleheads versus something that you can point to in the publications. There's a chain of logic that is used to justify it, but logic and tax laws don't always play nice.

If you sold them all on the same day, then the mostly likely scenario is that the IRS will never even know you made a transaction in the IRA. There's no requirement for the custodian to report anything, so unless the IRS did an audit and specifically asked for the information they wouldn't know.

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