Any impact selling then buying like kind funds between taxable and tIRA accounts?

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LookinAround
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Location: Chicagoland

Any impact selling then buying like kind funds between taxable and tIRA accounts?

Post by LookinAround » Mon Jan 13, 2020 10:10 am

I have a taxable account, tIRA and Roth IRA.

I had been applying my AA to the taxable and the tIRA as separate entities. So each had same the AA applied. Now that I realize it's more tax efficient to keep stock funds (yielding QDI) in my taxable acct and bond funds in tIRA, I want to reallocate to apply my AA looking at both funds as a single entity.

If, for example, on the same day: I convert 100k from bond to stock funds in taxable and convert 100K in tIRA from stock to bond, am I correct I shouldn't have a tax issue as
  • Sale of the bond funds in taxable produces a LT capgain. So issues with a wash sale shouldn't be an issue? LT capgain is only 5K so I'm ok there
  • My tIRA is entirely pre-tax dollars so there shouldn't be issue with any change to the cost basis
Any other comments, gothchas or impacts I'm missing?

Silk McCue
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Joined: Thu Feb 25, 2016 7:11 pm

Re: Any impact selling then buying like kind funds between taxable and tIRA accounts?

Post by Silk McCue » Mon Jan 13, 2020 10:18 am

Your analysis is correct. There are no gotchas. Proceed.

Cheers

ofckrupke
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Re: Any impact selling then buying like kind funds between taxable and tIRA accounts?

Post by ofckrupke » Mon Jan 13, 2020 10:21 am

LookinAround wrote:
Mon Jan 13, 2020 10:10 am
If, for example, on the same day: I convert 100k from bond to stock in taxable and convert 100K in tIRA from stock to bond, am I correct I shouldn't have a tax issue as
  • Sale of the bond funds in taxable produces a LT capgain. So issues with a wash sale shouldn't be an issue?
  • My tIRA is entirely pre-tax dollars so there shouldn't issue changes with cost basis
Each tax lot of bond fund should be separately evaluated as to gain or loss (rather than the sum across tax lots). If any are at loss and you don't want the loss disallowed, then you want to avoid choosing a substantially identical fund as the replacement in IRA (or don't sell the tax lot(s) with loss in the 61 day window centered on the purchase date of the replacement fund for the IRA). That is, the wash sale rule applies per tax lot, not per fund disposition on a single day or other bundling where aggregation could provide cover.

Changing method of basis recognition before sale, as allowed, could provide a workaround if this is going to be an issue.

Topic Author
LookinAround
Posts: 133
Joined: Tue Mar 27, 2018 5:41 am
Location: Chicagoland

Re: Any impact selling then buying like kind funds between taxable and tIRA accounts?

Post by LookinAround » Mon Jan 13, 2020 11:54 am

ofckrupke wrote:
Mon Jan 13, 2020 10:21 am
Each tax lot of bond fund should be separately evaluated as to gain or loss (rather than the sum across tax lots). If any are at loss and you don't want the loss disallowed, then you want to avoid choosing a substantially identical fund as the replacement in IRA (or don't sell the tax lot(s) with loss in the 61 day window centered on the purchase date of the replacement fund for the IRA). That is, the wash sale rule applies per tax lot, not per fund disposition on a single day or other bundling where aggregation could provide cover.

Changing method of basis recognition before sale, as allowed, could provide a workaround if this is going to be an issue.
Thanks for the "per lot" info in the first paragraph. It doesn't affect this first conversion I'm planning but good to know for subsequent conversions in the the near future

But I'm not quite certain what you're saying in the 2nd paragraph. Are you saying if I were to use an average cost basis when selling then the per lot impact doesn't apply?

ofckrupke
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Joined: Mon Jan 10, 2011 2:26 pm

Re: Any impact selling then buying like kind funds between taxable and tIRA accounts?

Post by ofckrupke » Mon Jan 13, 2020 12:08 pm

LookinAround wrote:
Mon Jan 13, 2020 11:54 am
But I'm not quite certain what you're saying in the 2nd paragraph. Are you saying if I were to use an average cost basis when selling then the per lot impact doesn't apply?
That's what I'm saying. For any lot the proceeds minus basis is the gain (loss). If a bunch of purchase lots are all sold at the same price/share on the same date and they all have the same recognized basis then they must together and separately be either at gain, at no gain, xor at loss. And if a lot isn't sold at a loss then it can't be a wash sale. In which case the only distinctions between different purchase lots in said sale concern the various holding periods.

I wouldn't mind being corrected if wrong.

terran
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Re: Any impact selling then buying like kind funds between taxable and tIRA accounts?

Post by terran » Mon Jan 13, 2020 2:47 pm

If anything you sell in taxable has a gain you'll owe tax on the gain. If anything you sell in in taxable has a loss and you buy a substantially identical investment in the IRA within 30 days you'll have a wash sale which means you'll lose the deduction for the loss.

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