Taxable and IRA example - is this a wash sale?

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Topic Author
justbpatient
Posts: 49
Joined: Mon May 08, 2017 4:06 pm

Taxable and IRA example - is this a wash sale?

Post by justbpatient »

Example:

VTI = total US stock market
FSKAX = total US stock market

For the purposes of this discussion, I'm considering VTI and FSKAX to be identical, even though VTI is an ETF, FSKAX is a mutual fund, and they track different indexes - I consider them to be very similar, and similar enough to possibly be "identical" for the purposes of a wash sale.

Purchase FSKAX in roth IRA, 100 shares, on 1/2/2020
Purchase VTI in taxable account, 100 shares, on 1/10/2020
Sell VTI (all shares purchased on 1/10/2020) in taxable account on 1/20/2020.
Also sell the FSKAX (all shares purchased on 1/2/2020) on 1/20/2020.

I'm pretty sure if I made the above taxable buy and sale of VTI without selling the FSKAX that there would be a wash sale...

But if I sold all of the recently purchased FSKAX in my Roth IRA on the same day as I sold the VTI shares in taxable - would this still be a wash sale?

Basically I'm trying to hold the same or very similar ETFs or mutual funds in taxable and Roth IRA (total US and international), and I want to know if I happen to sell all recently purchased shares of a total US (or international) ETF in taxable, can I sell any recently purchased (within 30 days) corresponding mutual fund in Roth IRA on the same day and avoid a wash sale?

If not, I'm considering just holding VT (total world) in Roth IRA to make things a bit easier - slightly higher expense ratio, but world market cap which is what I'm trying to achieve in Roth anyway.

Thanks for any advice.
lakpr
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Re: Taxable and IRA example - is this a wash sale?

Post by lakpr »

I have issues with your first assertion, that VTI and FSKAX are substantially identical. The IRS has not given any guidance about what constitutes a "substantially identical security", but pointing out that one is an ETF and the other a mutual fund, offered by two different brokerages, and track different indices is argument enough that they are not. IRS also never mentioned 401k plans as being involved in wash sales rules, only IRAs.

Thus the rest of the question is moot.
livesoft
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Re: Taxable and IRA example - is this a wash sale?

Post by livesoft »

No wash sale possible when one sells for gain. VTI was up in price between the dates you specified, but I only have access to closing prices.

I do not consider those two investments "substantially identical" even if you do.
Last edited by livesoft on Sat Feb 01, 2020 5:57 pm, edited 1 time in total.
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UpsetRaptor
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Re: Taxable and IRA example - is this a wash sale?

Post by UpsetRaptor »

I wouldn't consider funds that track different indexes to be identical enough to be a wash sale, but it's moot because in your example the exact fund was sold in < 30 days, which makes it subject to the wash sale rules. If one bought and sold on the dates you listed, they would sell for a gain and there would have been no wash sale, because it only applies to selling losers. If the sell had been at a loss, then yes, that would be a wash sale.
livesoft
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Re: Taxable and IRA example - is this a wash sale?

Post by livesoft »

UpsetRaptor wrote: Sat Feb 01, 2020 5:57 pm If the sell had been at a loss, then yes, that would be a wash sale.
That is untrue as well. You have re-stated one of the biggest falsehoods about potential wash sales that is passed on in this forum and probably elsewhere.

There needs to be some shares to pin a wash sale's temporarily disallowed loss onto and there are no such shares in the stated example. (OK, unless one attempts to pin the loss on the Fidelity fund which makes no sense to me.)
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Topic Author
justbpatient
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Re: Taxable and IRA example - is this a wash sale?

Post by justbpatient »

livesoft wrote: Sat Feb 01, 2020 5:55 pm No wash sale possible when one sells for gain. VTI was up in price between the dates you specified, but I only have access to closing prices.

I do not consider those two investments "substantially identical" even if you do.
Apologies I picked those dates at random and meant to convey that I was selling at a loss.

Assume then that it’s VTSAX in Roth and VTI in taxable, and I’ve sold VTI for a loss within 30 days. VTSAX was purchased on a different day in Roth but still within the last 30 days, and I sell all recently purchased shares of VTSAX on the same day as the VTI sell date.

Is this a wash sale?
livesoft
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Re: Taxable and IRA example - is this a wash sale?

Post by livesoft »

^I would call that a wash sale. Sell the recently purchased VTSAX the day before you sell VTI at a loss, then I would say, "Not a wash sale."
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puc_ytpme
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Re: Taxable and IRA example - is this a wash sale?

Post by puc_ytpme »

Kind of along the same lines except both taxable accounts

Example, Account A & Account B both taxable. Account A is set to spec id & had losses on lots purchased with in 30 days of each other. One sells the red for those lots in account A.

Account B, set for average cost has the same exact fund as Account A. Those lots, though not purchased on the same day are with in the 30 days of the purchases made in Account A(separate accounts, one portfolio). Account B is showing a gain for this one fund.

As it stands there is a temporarily disallowed loss until all shares from Account B are sold due to the purchases made with in the 30 day window of Account A, being viewed as replacement shares. Am I seeing this clearly?

Once sold, the larger loss from Account A would then offset the small gain from Account B & the temporarily disallowed loss or partial wash sale no longer in play?
No person ever steps in the same river twice, for it’s not the same river & they’re not the same person
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