Allocation Adjustment Sale Losses

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$tar-Lord
Posts: 43
Joined: Thu May 25, 2017 4:56 pm

Allocation Adjustment Sale Losses

Post by $tar-Lord »

If I have a Target date fund in taxable and I intend to change my asset allocation and glidepath schedule by selling one date for another and a loss is incurred, can the loss be written off? Could wash sale issues arise?
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WoodSpinner
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Joined: Mon Feb 27, 2017 1:15 pm

Re: Allocation Adjustment Sale Losses

Post by WoodSpinner »

OP,

Yes the loss can be used based on the IRS tax rules.

A different target date fund would not trigger a wash sale (e.g. substantially different)

WoodSpinner
BestCoast123
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Joined: Fri Jul 17, 2020 4:45 pm

Re: Allocation Adjustment Sale Losses

Post by BestCoast123 »

WoodSpinner wrote: Tue Sep 29, 2020 12:10 pm OP,

Yes the loss can be used based on the IRS tax rules.

A different target date fund would not trigger a wash sale (e.g. substantially different)

WoodSpinner
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grabiner
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Re: Allocation Adjustment Sale Losses

Post by grabiner »

It could be argued that all Vanguard Target Retirement funds dated 2045 or later are substantially identical, because they have the same four holdings in the same proportions. (The current holdings as reported may differ by a tenth of a percent, possibly based on which funds have had inflows and when they were rebalanced.) But for the same reason, you wouldn't change your asset allocation if you switched between those funds.

At the moment, you shouldn't have a significant capital loss on any Vanguard Target Retirement fund, because the market is near its peak.
Wiki David Grabiner
dbr
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Re: Allocation Adjustment Sale Losses

Post by dbr »

grabiner wrote: Tue Sep 29, 2020 10:35 pm It could be argued that all Vanguard Target Retirement funds dated 2045 or later are substantially identical, because they have the same four holdings in the same proportions. (The current holdings as reported may differ by a tenth of a percent, possibly based on which funds have had inflows and when they were rebalanced.) But for the same reason, you wouldn't change your asset allocation if you switched between those funds.

At the moment, you shouldn't have a significant capital loss on any Vanguard Target Retirement fund, because the market is near its peak.
It could be, and if it is the IRS arguing it, and especially arguing it in tax court and getting a favorable judgement, there would be a wash sale. If it is someone else arguing it, there is no wash sale. We need to award a prize to anyone who can actually get the IRS to respond to any of this, especially if they can get hauled into court over it.

Myself, I agree with your argument, but at the same time I would not hesitate to replace any fund with any fund that is not the identical fund or a share class of it and ignore any possible wash sale.
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