Wash sale & Reinvest Qs

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home_body
Posts: 73
Joined: Sat Jan 18, 2020 9:50 pm

Wash sale & Reinvest Qs

Post by home_body »

Hi all,

I am a bit confused with wash sale and hopefully someone can clarify.

In my Roth Ira I exchanged everything from VTSAX to VFIAX (new fund). There are capital gains and I am not TLH. Can I buy VTSAX & reinvest itself within 31 days in my taxable account? Does this consider/trigger a wash sale?

Sort of relate to the above. I want to turn-off/reinvest dividends VTSAX from my taxable, can I direct/reinvest dividends to a fund in my Roth Ira? I do see this as an option, but would this be allowed? Any penalties would occur?

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

Re: Wash sale & Reinvest Qs

Post by livesoft »

Yes, you can buy VTSAX in your taxable account. From what you have told us, this would not be a wash sale.

You cannot direct dividends from VTSAX in your taxable account to be contributed to your Roth IRA. You will have to make that contribution manually.
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samsoes
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Re: Wash sale & Reinvest Qs

Post by samsoes »

home_body wrote: Thu Jun 04, 2020 7:55 am Hi all,

I am a bit confused with wash sale and hopefully someone can clarify.

In my Roth Ira I exchanged everything from VTSAX to VFIAX (new fund). There are capital gains and I am not TLH. Can I buy VTSAX & reinvest itself within 31 days in my taxable account? Does this consider/trigger a wash sale?

Sort of relate to the above. I want to turn-off/reinvest dividends VTSAX from my taxable, can I direct/reinvest dividends to a fund in my Roth Ira? I do see this as an option, but would this be allowed? Any penalties would occur?

Thanks.
A wash sale only comes into play when you are taking losses (selling) in taxable. In such a case, purchase activity of substantially identical instruments in all of your accounts (IRA's also) are considered to determine if a wash sale has taken place as a result of the taxable sale loss. Since you are buying, not selling, the fund in the taxable account, no wash sale situation exists.
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retiredjg
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Joined: Thu Jan 10, 2008 12:56 pm

Re: Wash sale & Reinvest Qs

Post by retiredjg »

home_body wrote: Thu Jun 04, 2020 7:55 am In my Roth Ira I exchanged everything from VTSAX to VFIAX (new fund). There are capital gains and I am not TLH.
There are no "capital gains" in a Roth IRA. I don't know if there is an official term but "earnings" or "gains" seem to work. "Capital gains" refers to earnings in a taxable account.

And you cannot TLH in a Roth IRA. You can only TLH in a taxable account.

Can I buy VTSAX & reinvest itself within 31 days in my taxable account? Does this consider/trigger a wash sale?
Yes, you can buy it. No, that would not be a wash sale. A wash sale can only occur if you
  • -sell something

    -at a loss

    -in a taxable account
At this point, you have not sold anything in a taxable account at a loss.

Sort of relate to the above. I want to turn-off/reinvest dividends VTSAX from my taxable, can I direct/reinvest dividends to a fund in my Roth Ira?
Yes and no. You can use the dividend money as part of your annual contribution to Roth IRA if you are eligible. I don't think I have heard of any way to send the dividends directly to Roth IRA though. You could send the dividends to something like a money market fund in your taxable account to accumulate to later use for a Roth contribution if you want.
MrJedi
Posts: 343
Joined: Wed May 06, 2020 11:42 am

Re: Wash sale & Reinvest Qs

Post by MrJedi »

By definition a wash sale can only occur when selling at a loss.

Furthermore, a wash sale in itself is not illegal/disallowed, you are simply prohibited from deducting the loss (the loss isn't "lost" but simply rolled into the new assets purchased).

Furthermore again, even if you did sell in the Roth IRA at a loss, there is no deductible loss anyhow since it was inside the IRA.
Topic Author
home_body
Posts: 73
Joined: Sat Jan 18, 2020 9:50 pm

Re: Wash sale & Reinvest Qs

Post by home_body »

Thank you, all for the clarification. I am learning something new everyday here.
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