Wash Sale Rule - HSA and Taxable

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Doc7
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Wash Sale Rule - HSA and Taxable

Post by Doc7 »

livesoft wrote: Wed Mar 24, 2021 7:52 am Now that this Wash Sale thing is all settled, the forum should [sic] have another thread on this until 2022.
Alright all, hopefully you can help me or tell me if I need professional help beyond Turbotax Deluxe. Don't worry about me - I have learned my lesson and now only invest in ITOT in a taxable brokerage account, which follows a different index than any of my retirement account Vanguard or Fidelity funds.

Round 1
I purchased shares of Company X in January 2020 starting on the 19th - fractional shares - ~6 for basis $252, ~5 for basis $188, `3 for basis $112, ~4 for $390

On January 26th I completely closed the position selling 18 shares for ~$2900 with a total capital gains of $1,868.


Round 2 - didn't stay out and now I really screw up wash sales for future losses

On January 27th I buy back in Taxable ~13 shares for $2850 and sell for $3950 on January 29th. Capital gains in taxable addition of another $1100. (Total now $2900).

Lord knows why but on January 29th I buy 20 shares for $2569 and I sell on February 3rd for $2000, a loss of $529.

On February 1st in a different taxable account (which is only relevant insofar as it means I have to track wash sales across multiple vendors and cannot go by what the vendor reports), I purchase 14 Shares for $3629 and sell on February 3rd for $1467, a net loss of $2,160.

Meanwhile, in my HSA account I purchase $10,100 worth of the same stock on January 27th and I sold for $11,100 on January 29th. My belief is that this purchase and sale, on Jan 27th and 29th, potentially negates all capital losses in taxable account for 30 days before and after January 27th.

At this point in time, February 3rd, if I am correct, this means I have 2 sets of transactions with capital gains of ~$2900, a set of transactions with losses of $529, and another set of transactions with losses of $2,160, but I will owe taxes on the entire ~$2900 of gains in taxable accounts and deduct $0 worth of the ~$2700 of losses in taxable accounts. Net result : Earn $200 and pay short term capital gains on $2900. (plus earn $1000 in HSA)



From February 3rd, until February 24th, I own 0 shares of Company X.

February 24th I buy and sell a share and lose $2.23 (also washed into HSA if I am correct).

March 26th - 30th I buy and then sell for a net gain of $39.




Is my paragraph above regarding the HSA Correct? Do I simply mark each and every sale in Turbotax as "W" for Wash and never do this again?
Last edited by Doc7 on Tue Jan 11, 2022 12:00 pm, edited 2 times in total.
livesoft
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Re: Wash Sale Rule - HSA and Taxable

Post by livesoft »

I am pretty sure TT Deluxe will not be able to help you. :twisted:
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Lee_WSP
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

Your HSA probably washed the shares sold for losses in taxable. However, there is no clear guidance other than a PLR regarding IRAs. But nothing is contrary to the wash sale rule applying, so IMO purchases in the HSA can trigger the rule.

The basis of the substantially identical shares is then adjusted.

However, the wash sale rule applies the wash first to the oldest substantially identical shares within the sixty day period. This would be the shares purchased in taxable.
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Doc7
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

Lee_WSP wrote: Tue Jan 11, 2022 12:28 pm Your HSA probably washed the shares sold for losses in taxable. However, there is no clear guidance other than a PLR regarding IRAs. But nothing is contrary to the wash sale rule applying, so IMO purchases in the HSA can trigger the rule.

The basis of the substantially identical shares is then adjusted.

However, the wash sale rule applies the wash first to the oldest substantially identical shares within the sixty day period. This would be the shares purchased in taxable.

Do you tend to agree with this statement then, and to make it easiest I simply mark all sales in TurboTax as "W" and ensure my marginal tax rate is applied to $2900 when I input my investment activities?

I will owe taxes on the entire ~$2900 of gains in taxable accounts and deduct $0 worth of the ~$2700 of losses in taxable accounts. Net result : Earn $200 and pay short term capital gains on $2900. (plus earn $1000 in HSA)
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Lee_WSP
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

Doc7 wrote: Tue Jan 11, 2022 12:37 pm
Lee_WSP wrote: Tue Jan 11, 2022 12:28 pm Your HSA probably washed the shares sold for losses in taxable. However, there is no clear guidance other than a PLR regarding IRAs. But nothing is contrary to the wash sale rule applying, so IMO purchases in the HSA can trigger the rule.

The basis of the substantially identical shares is then adjusted.

However, the wash sale rule applies the wash first to the oldest substantially identical shares within the sixty day period. This would be the shares purchased in taxable.

Do you tend to agree with this statement then, and to make it easiest I simply mark all sales in TurboTax as "W" and ensure my marginal tax rate is applied to $2900 when I input my investment activities?

I will owe taxes on the entire ~$2900 of gains in taxable accounts and deduct $0 worth of the ~$2700 of losses in taxable accounts. Net result : Earn $200 and pay short term capital gains on $2900. (plus earn $1000 in HSA)
I agree with livesoft, Turbotax is not designed to help you with this one. You’ll need to fill out a form. I can’t recall the number.
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Doc7
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

Lee_WSP wrote: Tue Jan 11, 2022 12:42 pm
Doc7 wrote: Tue Jan 11, 2022 12:37 pm
Lee_WSP wrote: Tue Jan 11, 2022 12:28 pm Your HSA probably washed the shares sold for losses in taxable. However, there is no clear guidance other than a PLR regarding IRAs. But nothing is contrary to the wash sale rule applying, so IMO purchases in the HSA can trigger the rule.

The basis of the substantially identical shares is then adjusted.

However, the wash sale rule applies the wash first to the oldest substantially identical shares within the sixty day period. This would be the shares purchased in taxable.

Do you tend to agree with this statement then, and to make it easiest I simply mark all sales in TurboTax as "W" and ensure my marginal tax rate is applied to $2900 when I input my investment activities?

I will owe taxes on the entire ~$2900 of gains in taxable accounts and deduct $0 worth of the ~$2700 of losses in taxable accounts. Net result : Earn $200 and pay short term capital gains on $2900. (plus earn $1000 in HSA)
I agree with livesoft, Turbotax is not designed to help you with this one. You’ll need to fill out a form. I can’t recall the number.
OK. Another poster wrote, "You file form 8949 and adjust the losses to 0, using a code (W) to indicate that this is due to it being a wash sale." in another thread related to this topic. I thought that form would be generated by TT when the investments were added, and then could be manually accessed to apply the W.
nalor511
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Re: Wash Sale Rule - HSA and Taxable

Post by nalor511 »

Doc7 wrote: Tue Jan 11, 2022 12:52 pm
Lee_WSP wrote: Tue Jan 11, 2022 12:42 pm
Doc7 wrote: Tue Jan 11, 2022 12:37 pm
Lee_WSP wrote: Tue Jan 11, 2022 12:28 pm Your HSA probably washed the shares sold for losses in taxable. However, there is no clear guidance other than a PLR regarding IRAs. But nothing is contrary to the wash sale rule applying, so IMO purchases in the HSA can trigger the rule.

The basis of the substantially identical shares is then adjusted.

However, the wash sale rule applies the wash first to the oldest substantially identical shares within the sixty day period. This would be the shares purchased in taxable.

Do you tend to agree with this statement then, and to make it easiest I simply mark all sales in TurboTax as "W" and ensure my marginal tax rate is applied to $2900 when I input my investment activities?

I will owe taxes on the entire ~$2900 of gains in taxable accounts and deduct $0 worth of the ~$2700 of losses in taxable accounts. Net result : Earn $200 and pay short term capital gains on $2900. (plus earn $1000 in HSA)
I agree with livesoft, Turbotax is not designed to help you with this one. You’ll need to fill out a form. I can’t recall the number.
OK. Another poster wrote, "You file form 8949 and adjust the losses to 0, using a code (W) to indicate that this is due to it being a wash sale." in another thread related to this topic. I thought that form would be generated by TT when the investments were added, and then could be manually accessed to apply the W.
Why don't you try it and see?
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Doc7
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

nalor511 wrote: Tue Jan 11, 2022 1:24 pm
Doc7 wrote: Tue Jan 11, 2022 12:52 pm
Lee_WSP wrote: Tue Jan 11, 2022 12:42 pm
Doc7 wrote: Tue Jan 11, 2022 12:37 pm
Lee_WSP wrote: Tue Jan 11, 2022 12:28 pm Your HSA probably washed the shares sold for losses in taxable. However, there is no clear guidance other than a PLR regarding IRAs. But nothing is contrary to the wash sale rule applying, so IMO purchases in the HSA can trigger the rule.

The basis of the substantially identical shares is then adjusted.

However, the wash sale rule applies the wash first to the oldest substantially identical shares within the sixty day period. This would be the shares purchased in taxable.

Do you tend to agree with this statement then, and to make it easiest I simply mark all sales in TurboTax as "W" and ensure my marginal tax rate is applied to $2900 when I input my investment activities?

I will owe taxes on the entire ~$2900 of gains in taxable accounts and deduct $0 worth of the ~$2700 of losses in taxable accounts. Net result : Earn $200 and pay short term capital gains on $2900. (plus earn $1000 in HSA)
I agree with livesoft, Turbotax is not designed to help you with this one. You’ll need to fill out a form. I can’t recall the number.
OK. Another poster wrote, "You file form 8949 and adjust the losses to 0, using a code (W) to indicate that this is due to it being a wash sale." in another thread related to this topic. I thought that form would be generated by TT when the investments were added, and then could be manually accessed to apply the W.
Why don't you try it and see?

TurboTax May let me do this… but it does not necessarily mean it is correct for me to do. Can I get in trouble for marking too many items as a Wash Sale, and paying too much taxes? It seems up for debate as to whether my HSA purchases caused an irrecoverable wash and loss of tax-loss ability.
Last edited by Doc7 on Tue Jan 11, 2022 1:42 pm, edited 1 time in total.
rkhusky
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

Doc7 wrote: Tue Jan 11, 2022 12:52 pm OK. Another poster wrote, "You file form 8949 and adjust the losses to 0, using a code (W) to indicate that this is due to it being a wash sale." in another thread related to this topic. I thought that form would be generated by TT when the investments were added, and then could be manually accessed to apply the W.
I've never used TT, but it should ask whether you have adjustments to any of your transactions for Schedule D. That will trigger the generation of Form 8949.

If all your transactions had their basis reported to the IRS and you have no adjustments, form 8949 is optional.

You would put your unadjusted basis in columns (e) and (g)* and a W in column (f), which should result in your full gain in column (h).

edit: *enter your nondeductible loss as a positive number in column (g)
example: purchase price = $200, sell for $100, then $100 in (d), $200 in (e), $100 in (g), $0 in (h).
Last edited by rkhusky on Tue Jan 11, 2022 1:51 pm, edited 3 times in total.
nalor511
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Re: Wash Sale Rule - HSA and Taxable

Post by nalor511 »

Doc7 wrote: Tue Jan 11, 2022 1:34 pm
nalor511 wrote: Tue Jan 11, 2022 1:24 pm
Doc7 wrote: Tue Jan 11, 2022 12:52 pm
Lee_WSP wrote: Tue Jan 11, 2022 12:42 pm
Doc7 wrote: Tue Jan 11, 2022 12:37 pm


Do you tend to agree with this statement then, and to make it easiest I simply mark all sales in TurboTax as "W" and ensure my marginal tax rate is applied to $2900 when I input my investment activities?

I will owe taxes on the entire ~$2900 of gains in taxable accounts and deduct $0 worth of the ~$2700 of losses in taxable accounts. Net result : Earn $200 and pay short term capital gains on $2900. (plus earn $1000 in HSA)
I agree with livesoft, Turbotax is not designed to help you with this one. You’ll need to fill out a form. I can’t recall the number.
OK. Another poster wrote, "You file form 8949 and adjust the losses to 0, using a code (W) to indicate that this is due to it being a wash sale." in another thread related to this topic. I thought that form would be generated by TT when the investments were added, and then could be manually accessed to apply the W.
Why don't you try it and see?

TurboTax May let me do this… but it does not necessarily mean it is correct for me to do.
https://ttlc.intuit.com/community/enter ... e/00/25997

https://ttlc.intuit.com/community/taxes ... 00/1338918
Topic Author
Doc7
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

nalor511 wrote: Tue Jan 11, 2022 1:40 pm snip
Sorry, I updated my previous response while you were responding, to add:
"Can I get in trouble for marking too many items as a Wash Sale, and paying too much taxes? It seems up for debate as to whether my HSA purchases caused an irrecoverable wash and loss of tax-loss ability." Additionally it's either $200 of taxable gains or $2900 - a significant chunk, at my budget, especially as with only $200 of gains in taxable it is not like I could set aside the funding for this tax burden!
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

Doc7 wrote: Tue Jan 11, 2022 1:43 pm
nalor511 wrote: Tue Jan 11, 2022 1:40 pm snip
Sorry, I updated my previous response while you were responding, to add:
"Can I get in trouble for marking too many items as a Wash Sale, and paying too much taxes? It seems up for debate as to whether my HSA purchases caused an irrecoverable wash and loss of tax-loss ability." Additionally it's either $200 of taxable gains or $2900 - a significant chunk, at my budget, especially as with only $200 of gains in taxable it is not like I could set aside the funding for this tax burden!
There is no penalty for overpaying taxes. Only underpayment of taxes.

I suggest you try and read through the instructions for the form. If you still can’t figure it out, I’d at least call a tax preparer familiar with the wash sale rules.
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

Doc7 wrote: Tue Jan 11, 2022 1:43 pm
nalor511 wrote: Tue Jan 11, 2022 1:40 pm snip
Sorry, I updated my previous response while you were responding, to add:
"Can I get in trouble for marking too many items as a Wash Sale, and paying too much taxes? It seems up for debate as to whether my HSA purchases caused an irrecoverable wash and loss of tax-loss ability." Additionally it's either $200 of taxable gains or $2900 - a significant chunk, at my budget, especially as with only $200 of gains in taxable it is not like I could set aside the funding for this tax burden!
The wash sale law doesn't mention any types of accounts, so all account types are subject to the rule, until Congress and/or the IRS provides an exemption. Congress and/or the IRS have never provided an exemption to the wash rule for any type of taxpayer account.
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Re: Wash Sale Rule - HSA and Taxable

Post by Yarlonkol12 »

rkhusky wrote: Tue Jan 11, 2022 1:55 pm
Doc7 wrote: Tue Jan 11, 2022 1:43 pm
nalor511 wrote: Tue Jan 11, 2022 1:40 pm snip
Sorry, I updated my previous response while you were responding, to add:
"Can I get in trouble for marking too many items as a Wash Sale, and paying too much taxes? It seems up for debate as to whether my HSA purchases caused an irrecoverable wash and loss of tax-loss ability." Additionally it's either $200 of taxable gains or $2900 - a significant chunk, at my budget, especially as with only $200 of gains in taxable it is not like I could set aside the funding for this tax burden!
The wash sale law doesn't mention any types of accounts, so all account types are subject to the rule, until Congress and/or the IRS provides an exemption. Congress and/or the IRS have never provided an exemption to the wash rule for any type of taxpayer account.
Could you share the source which indicates that this rule could apply to 401k and HSA?

I'm certainly no expert or lawyer, but my understanding was that it only applies to IRA, Roth IRA, or Spousal accounts if MFJ. Page 56 in pub 550 states the following:

https://www.irs.gov/pub/irs-pdf/p550.pdf

"Wash Sales
You cannot deduct losses from sales or trades
of stock or securities in a wash sale unless the
loss was incurred in the ordinary course of your
business as a dealer in stock or securities.
A wash sale occurs when you sell or trade
stock or securities at a loss and within 30 days

before or after the sale you:

1. Buy substantially identical stock or securities,
2. Acquire substantially identical stock or securities in a fully taxable trade,
3. Acquire a contract or option to buy substantially identical stock or securities, or
4. Acquire substantially identical stock for
your individual retirement arrangement
(IRA) or Roth IRA.

If you sell stock and your spouse or a corporation you control buys substantially identical
stock, you also have a wash sale.
If your loss was disallowed because of the
wash sale rules, add the disallowed loss to the
cost of the new stock or securities (except in (4)
above). The result is your basis in the new stock
or securities. This adjustment postpones the
loss deduction until the disposition of the new
stock or securities. Your holding period for the
new stock or securities includes the holding period of the stock or securities sold."
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Doc7
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

Thank you. I will go ahead and ensure I record my “before entering investments” tax result and my “after entering investments and marking everything as a wash” tax result. If TT does not appear to be properly accounting me for my marginal tax rate on $2900 of gains I will troubleshoot further and/or seek professional adviser. I should have the forms required to proceed in February.


I will also note that at this point forward, I will no longer make taxable investment transactions at more than one vendor in a calendar year and I will not trade substantially identical securities or options in retirement accounts and taxable accounts.
Last edited by Doc7 on Tue Jan 11, 2022 2:18 pm, edited 1 time in total.
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

Yarlonkol12 wrote: Tue Jan 11, 2022 2:10 pm …pub550…
Pubs are not binding. The code and regs are. The actual courts are authority, the tax court is also authority. PLR’s are persuasive.

The actual text is “taxpayer acquires…”

The IRA is included because of a private letter ruling from 2008.

The HSA is cloer to an IRA than 401k, but a 401k is within the interpretation the service used in the private letter.

So, in short, while it’s not clear that you’re violating the rule, it is clear that the service believes you are, they just haven’t bothered to litigate this yet. The 401k is up in the air, but if they follow the same reasoning, the 401k will also count as substantially identical shares acquired by the taxpayer.
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Re: Wash Sale Rule - HSA and Taxable

Post by Yarlonkol12 »

Lee_WSP wrote: Tue Jan 11, 2022 2:15 pm
Yarlonkol12 wrote: Tue Jan 11, 2022 2:10 pm …pub550…
Pubs are not binding. The code and regs are. The actual courts are authority, the tax court is also authority. PLR’s are persuasive.

The actual text is “taxpayer acquires…”

The IRA is included because of a private letter ruling from 2008.

The HSA is cloer to an IRA than 401k, but a 401k is within the interpretation the service used in the private letter.

So, in short, while it’s not clear that you’re violating the rule, it is clear that the service believes you are, they just haven’t bothered to litigate this yet. The 401k is up in the air, but if they follow the same reasoning, the 401k will also count as substantially identical shares acquired by the taxpayer.
Lee_WSP, Thanks for the clarification!
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Re: Wash Sale Rule - HSA and Taxable

Post by gobel »

Doc7 wrote: Tue Jan 11, 2022 11:11 am
livesoft wrote: Wed Mar 24, 2021 7:52 am Now that this Wash Sale thing is all settled, the forum should [sic] have another thread on this until 2022.
On January 27th I buy back in Taxable ~13 shares for $2850 and sell for $3950 on January 29th. Capital gains in taxable addition of another $1100. (Total now $2900).

Lord knows why but on January 29th I buy 20 shares for $2569 and I sell on February 3rd for $2000, a loss of $529.
I'd be interested to know what your account currently says about your sale of the 20 shares you bought on Jan 29 and sold for a loss. IMO there is no wash sale here because you had already sold all your previous lots (although it is muddied a bit by being on the same day, I guess). Did your account mark this sale as a wash sale and adjust the basis of your earlier lots? This is the gist of the debate immediately following the post you linked above.
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Re: Wash Sale Rule - HSA and Taxable

Post by Nate79 »

People are certainly entitled to their opinion on what accounts count towards wash sales, but it is certainly not agreed that any account beyond taxable and IRAs are included. If it is your opinion that HSAs and 401k count then fine. Myself and many (most?) don't.
rkhusky
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

Nate79 wrote: Tue Jan 11, 2022 5:24 pm People are certainly entitled to their opinion on what accounts count towards wash sales, but it is certainly not agreed that any account beyond taxable and IRAs are included. If it is your opinion that HSAs and 401k count then fine. Myself and many (most?) don't.
The wash sale law does not specify the types of accounts for which it applies. Neither does it provide an exemption for HSA's or 401k's, or any other account type. I am not aware of any IRS or Tax Court ruling providing an exemption for HSA's or 401k's, or for any other account type for that matter. So, there is no historical comparisons on which to judge whether 401k's or HSA's meet the criteria for getting an exemption.

I see no basis for believing that HSA's or 401k's are exempt from the wash sale law, other than the mistaken idea that the IRS must list every account type for which the wash sale law applies, when in fact the taxpayer is supposed to find an explicit exemption before proceeding.
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Doc7
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

gobel wrote: Tue Jan 11, 2022 4:04 pm
Doc7 wrote: Tue Jan 11, 2022 11:11 am
livesoft wrote: Wed Mar 24, 2021 7:52 am Now that this Wash Sale thing is all settled, the forum should [sic] have another thread on this until 2022.
On January 27th I buy back in Taxable ~13 shares for $2850 and sell for $3950 on January 29th. Capital gains in taxable addition of another $1100. (Total now $2900).

Lord knows why but on January 29th I buy 20 shares for $2569 and I sell on February 3rd for $2000, a loss of $529.
I'd be interested to know what your account currently says about your sale of the 20 shares you bought on Jan 29 and sold for a loss. IMO there is no wash sale here because you had already sold all your previous lots (although it is muddied a bit by being on the same day, I guess). Did your account mark this sale as a wash sale and adjust the basis of your earlier lots? This is the gist of the debate immediately following the post you linked above.

It does not appear to me that the monthly RobinHood statement (I switched to Fidelity for the February shares) indicates wash sales on any transactions; I will get the tax statement in February 2022.
Last edited by Doc7 on Tue Jan 11, 2022 11:03 pm, edited 1 time in total.
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Re: Wash Sale Rule - HSA and Taxable

Post by Nate79 »

rkhusky wrote: Tue Jan 11, 2022 8:13 pm
Nate79 wrote: Tue Jan 11, 2022 5:24 pm People are certainly entitled to their opinion on what accounts count towards wash sales, but it is certainly not agreed that any account beyond taxable and IRAs are included. If it is your opinion that HSAs and 401k count then fine. Myself and many (most?) don't.
The wash sale law does not specify the types of accounts for which it applies. Neither does it provide an exemption for HSA's or 401k's, or any other account type. I am not aware of any IRS or Tax Court ruling providing an exemption for HSA's or 401k's, or for any other account type for that matter. So, there is no historical comparisons on which to judge whether 401k's or HSA's meet the criteria for getting an exemption.

I see no basis for believing that HSA's or 401k's are exempt from the wash sale law, other than the mistaken idea that the IRS must list every account type for which the wash sale law applies, when in fact the taxpayer is supposed to find an explicit exemption before proceeding.
Yes, you have made your opinion on this subject very clear so many times.
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Doc7
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

gobel wrote: Tue Jan 11, 2022 4:04 pm
Doc7 wrote: Tue Jan 11, 2022 11:11 am
livesoft wrote: Wed Mar 24, 2021 7:52 am Now that this Wash Sale thing is all settled, the forum should [sic] have another thread on this until 2022.
On January 27th I buy back in Taxable ~13 shares for $2850 and sell for $3950 on January 29th. Capital gains in taxable addition of another $1100. (Total now $2900).

Lord knows why but on January 29th I buy 20 shares for $2569 and I sell on February 3rd for $2000, a loss of $529.
I'd be interested to know what your account currently says about your sale of the 20 shares you bought on Jan 29 and sold for a loss. IMO there is no wash sale here because you had already sold all your previous lots (although it is muddied a bit by being on the same day, I guess). Did your account mark this sale as a wash sale and adjust the basis of your earlier lots? This is the gist of the debate immediately following the post you linked above.
As stated in my last reply to this quote, Robinhood monthly statements don't seem to indicate wash sales but I will see on the year end. However, I was thinking I would also mention that in the RH account, I never sold a partial lot. Every time I sold it was 100% of my stake. So no robinhood sales would be marked as washes, i think (unless I continued owning the next lots of purchases for extended times, in which case the loss would be in their basis, but this did not occur). However, I know they did wash into my HSA, which Robinhood would not be able to indicate.



The irritating thing about all of this, is that if I was an average dummy buying and selling, my tax burden would like be about $600 less for this whole ordeal. That's what would happen if I simply uploaded all my tax forms from the brokerages. But, like a decent human, an honest American, and of course as required by Boglehead philosophy let alone forum policy, I will correctly document this entire event. I wonder how many millions of folks do not.
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Lee_WSP
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

Doc7 wrote: Wed Jan 12, 2022 10:48 am
gobel wrote: Tue Jan 11, 2022 4:04 pm
Doc7 wrote: Tue Jan 11, 2022 11:11 am
livesoft wrote: Wed Mar 24, 2021 7:52 am Now that this Wash Sale thing is all settled, the forum should [sic] have another thread on this until 2022.
On January 27th I buy back in Taxable ~13 shares for $2850 and sell for $3950 on January 29th. Capital gains in taxable addition of another $1100. (Total now $2900).

Lord knows why but on January 29th I buy 20 shares for $2569 and I sell on February 3rd for $2000, a loss of $529.
I'd be interested to know what your account currently says about your sale of the 20 shares you bought on Jan 29 and sold for a loss. IMO there is no wash sale here because you had already sold all your previous lots (although it is muddied a bit by being on the same day, I guess). Did your account mark this sale as a wash sale and adjust the basis of your earlier lots? This is the gist of the debate immediately following the post you linked above.
As stated in my last reply to this quote, Robinhood monthly statements don't seem to indicate wash sales but I will see on the year end. However, I was thinking I would also mention that in the RH account, I never sold a partial lot. Every time I sold it was 100% of my stake. So no robinhood sales would be marked as washes, i think (unless I continued owning the next lots of purchases for extended times, in which case the loss would be in their basis, but this did not occur). However, I know they did wash into my HSA, which Robinhood would not be able to indicate.



The irritating thing about all of this, is that if I was an average dummy buying and selling, my tax burden would like be about $600 less for this whole ordeal. That's what would happen if I simply uploaded all my tax forms from the brokerages. But, like a decent human, an honest American, and of course as required by Boglehead philosophy let alone forum policy, I will correctly document this entire event. I wonder how many millions of folks do not.
While there is no rule or reg that I know of which states that shares that have already been sold are disregarded for a wash sale, if you did indeed wash your sale, then the wash would first be applied to the shares in your taxable account, whose bases would be adjusted and your net result would be identical. Unless you bought more shares on the 29th than you bought & sold previously.
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Re: Wash Sale Rule - HSA and Taxable

Post by aristotelian »

rkhusky wrote: Tue Jan 11, 2022 1:55 pm The wash sale law doesn't mention any types of accounts, so all account types are subject to the rule, until Congress and/or the IRS provides an exemption. Congress and/or the IRS have never provided an exemption to the wash rule for any type of taxpayer account.
They have also to my knowledge never disallowed a wash sale created by 401k transaction in the course of an audit. Presumably they have had opportunity to do so. That said there is a risk that one of us will be the first.
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

Lee_WSP wrote: Wed Jan 12, 2022 11:47 am
Doc7 wrote: Wed Jan 12, 2022 10:48 am
gobel wrote: Tue Jan 11, 2022 4:04 pm
Doc7 wrote: Tue Jan 11, 2022 11:11 am
livesoft wrote: Wed Mar 24, 2021 7:52 am Now that this Wash Sale thing is all settled, the forum should [sic] have another thread on this until 2022.
On January 27th I buy back in Taxable ~13 shares for $2850 and sell for $3950 on January 29th. Capital gains in taxable addition of another $1100. (Total now $2900).

Lord knows why but on January 29th I buy 20 shares for $2569 and I sell on February 3rd for $2000, a loss of $529.
I'd be interested to know what your account currently says about your sale of the 20 shares you bought on Jan 29 and sold for a loss. IMO there is no wash sale here because you had already sold all your previous lots (although it is muddied a bit by being on the same day, I guess). Did your account mark this sale as a wash sale and adjust the basis of your earlier lots? This is the gist of the debate immediately following the post you linked above.
As stated in my last reply to this quote, Robinhood monthly statements don't seem to indicate wash sales but I will see on the year end. However, I was thinking I would also mention that in the RH account, I never sold a partial lot. Every time I sold it was 100% of my stake. So no robinhood sales would be marked as washes, i think (unless I continued owning the next lots of purchases for extended times, in which case the loss would be in their basis, but this did not occur). However, I know they did wash into my HSA, which Robinhood would not be able to indicate.



The irritating thing about all of this, is that if I was an average dummy buying and selling, my tax burden would like be about $600 less for this whole ordeal. That's what would happen if I simply uploaded all my tax forms from the brokerages. But, like a decent human, an honest American, and of course as required by Boglehead philosophy let alone forum policy, I will correctly document this entire event. I wonder how many millions of folks do not.
While there is no rule or reg that I know of which states that shares that have already been sold are disregarded for a wash sale, if you did indeed wash your sale, then the wash would first be applied to the shares in your taxable account, whose bases would be adjusted and your net result would be identical. Unless you bought more shares on the 29th than you bought & sold previously.
I will try again to say what I was saying.

I am looking at Fidelity now to see how they mark wash sales. And what I see is, for example, when I bought the only 5 shares of Apple I've ever owened on February 3rd and sold Apple on February 5th, it is not flagged as a Wash Sale. However, if I had purchased any apple again prior to March 5th, the February 5th sale would then be retroactively marked as a wash sale and the net loss would modify the basis of the later purchase.

Because in the case of Robinhood, how THEY see it (which again, is incorrect, as I used not only multiple brokerages, but also an HSA account), because all of my buying and selling was in a 13 day period with 0 shares held at the end and not repurchased again in the subsequent 30 days, they will, like Fidelity with AAPL, not mark any of these shares as a wash sale.
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

Doc7 wrote: Wed Jan 12, 2022 12:00 pm
Lee_WSP wrote: Wed Jan 12, 2022 11:47 am
Doc7 wrote: Wed Jan 12, 2022 10:48 am
gobel wrote: Tue Jan 11, 2022 4:04 pm
Doc7 wrote: Tue Jan 11, 2022 11:11 am
On January 27th I buy back in Taxable ~13 shares for $2850 and sell for $3950 on January 29th. Capital gains in taxable addition of another $1100. (Total now $2900).

Lord knows why but on January 29th I buy 20 shares for $2569 and I sell on February 3rd for $2000, a loss of $529.
I'd be interested to know what your account currently says about your sale of the 20 shares you bought on Jan 29 and sold for a loss. IMO there is no wash sale here because you had already sold all your previous lots (although it is muddied a bit by being on the same day, I guess). Did your account mark this sale as a wash sale and adjust the basis of your earlier lots? This is the gist of the debate immediately following the post you linked above.
As stated in my last reply to this quote, Robinhood monthly statements don't seem to indicate wash sales but I will see on the year end. However, I was thinking I would also mention that in the RH account, I never sold a partial lot. Every time I sold it was 100% of my stake. So no robinhood sales would be marked as washes, i think (unless I continued owning the next lots of purchases for extended times, in which case the loss would be in their basis, but this did not occur). However, I know they did wash into my HSA, which Robinhood would not be able to indicate.



The irritating thing about all of this, is that if I was an average dummy buying and selling, my tax burden would like be about $600 less for this whole ordeal. That's what would happen if I simply uploaded all my tax forms from the brokerages. But, like a decent human, an honest American, and of course as required by Boglehead philosophy let alone forum policy, I will correctly document this entire event. I wonder how many millions of folks do not.
While there is no rule or reg that I know of which states that shares that have already been sold are disregarded for a wash sale, if you did indeed wash your sale, then the wash would first be applied to the shares in your taxable account, whose bases would be adjusted and your net result would be identical. Unless you bought more shares on the 29th than you bought & sold previously.
I will try again to say what I was saying.

I am looking at Fidelity now to see how they mark wash sales. And what I see is, for example, when I bought the only 5 shares of Apple I've ever owened on February 3rd and sold Apple on February 5th, it is not flagged as a Wash Sale. However, if I had purchased any apple again prior to March 5th, the February 5th sale would then be retroactively marked as a wash sale and the net loss would modify the basis of the later purchase.

Because in the case of Robinhood, how THEY see it (which again, is incorrect, as I used not only multiple brokerages, but also an HSA account), because all of my buying and selling was in a 13 day period with 0 shares held at the end and not repurchased again in the subsequent 30 days, they will, like Fidelity with AAPL, not mark any of these shares as a wash sale.
When you completely clear out your position, the net result is no wash sale, so there's no reason for a brokerage to mark it as such. There may be a ruling which says previously liquidated shares are disregarded, but I am unaware of it, I'm also not a tax lawyer.

Brokerages follow the instructions on form 1099-B which states that they shall report the *net* wash sale amount (ie the disallowed loss). So, as far as they're concerned, 1) they don't know about or care about your activities anywhere else, and 2) so long as they track your *net* disallowed losses, they're calling it a day. IMO.
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

Lee_WSP wrote: Wed Jan 12, 2022 11:47 am Unless you bought more shares on the 29th than you bought & sold previously.
On the 27th, in my HSA, I purchased $10,100 worth, which is $7000 more worth than I ever owned in any of my taxable accounts. I don't think I can do any "share for share" math to get out of washing all losses into HSA. Which is what leaves me with $200 of actual Capital Gains but $2900 of Taxable Capital Gains (get dinged for all the profitable transactions but lose the ability to deduct the costly ones).
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

Lee_WSP wrote: Wed Jan 12, 2022 12:06 pm
When you completely clear out your position, the net result is no wash sale, so there's no reason for a brokerage to mark it as such. There may be a ruling which says previously liquidated shares are disregarded, but I am unaware of it, I'm also not a tax lawyer.

Brokerages follow the instructions on form 1099-B which states that they shall report the *net* wash sale amount (ie the disallowed loss). So, as far as they're concerned, 1) they don't know about or care about your activities anywhere else, and 2) so long as they track your *net* disallowed losses, they're calling it a day. IMO.


I Think we are in 100% agreement, the brokerage not marking it as a wash is precisely what I said in my post that you quoted just a few replies above.
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

Doc7 wrote: Wed Jan 12, 2022 12:08 pm
Lee_WSP wrote: Wed Jan 12, 2022 11:47 am Unless you bought more shares on the 29th than you bought & sold previously.
On the 27th, in my HSA, I purchased $10,100 worth, which is $7000 more worth than I ever owned in any of my taxable accounts. I don't think I can do any "share for share" math to get out of washing all losses into HSA. Which is what leaves me with $200 of actual Capital Gains but $2900 of Taxable Capital Gains (get dinged for all the profitable transactions but lose the ability to deduct the costly ones).
Yes, but the January purchases in your taxable account predate the HSA purchase and were within the 61 day period.

According to the ordering rules, the shares are matched first purchased, first washed. So your taxable shares will be the first basis adjusted shares, then if any shares need to be matched, your HSA shares will be matched.

Once matched, they cannot be used to wash again.

Honestly it'd be a lot simpler if Congress or the service just issued a ruling (if it doesn't already exist) which states that shares not held at the point of the loss will be disregarded.
Doc7 wrote: Wed Jan 12, 2022 12:09 pm
Lee_WSP wrote: Wed Jan 12, 2022 12:06 pm
When you completely clear out your position, the net result is no wash sale, so there's no reason for a brokerage to mark it as such. There may be a ruling which says previously liquidated shares are disregarded, but I am unaware of it, I'm also not a tax lawyer.

Brokerages follow the instructions on form 1099-B which states that they shall report the *net* wash sale amount (ie the disallowed loss). So, as far as they're concerned, 1) they don't know about or care about your activities anywhere else, and 2) so long as they track your *net* disallowed losses, they're calling it a day. IMO.


I Think we are in 100% agreement, the brokerage not marking it as a wash is precisely what I said in my post that you quoted just a few replies above.
We completely agree on that. It's the loss of the full deduction that I don't agree with. See above.
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Re: Wash Sale Rule - HSA and Taxable

Post by gobel »

Doc7 wrote: Wed Jan 12, 2022 10:48 am As stated in my last reply to this quote, Robinhood monthly statements don't seem to indicate wash sales but I will see on the year end. However, I was thinking I would also mention that in the RH account, I never sold a partial lot. Every time I sold it was 100% of my stake. So no robinhood sales would be marked as washes, i think (unless I continued owning the next lots of purchases for extended times, in which case the loss would be in their basis, but this did not occur). However, I know they did wash into my HSA, which Robinhood would not be able to indicate.
If RH says you don't have a wash sale, I feel that the HSA does not either (all shares in both accounts sold by the 29th, when you subsequently bought the losing lots on the 29th and 1st).

ie I think the key is if
  • buy/sell lot 1 for a gain, then
  • buy/sell lot 2 for a loss
  • all within 30 days
triggers a wash. If not, then you don't have a wash sale anywhere (until the final txn on Feb 24th).

However, there was some debate in the other thread about this case. Some people said a literal reading makes the case above a wash sale, with lot 1 adjusted. That only really matters if lot 1 happened to be in a tax advantaged account where you'd lose the wash (instead of just recouping it because lot 1 was already sold). I don't really agree with this and was hoping your test case would prove it one way or the other (at least for what one brokerage thinks).
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

gobel wrote: Wed Jan 12, 2022 12:39 pm
Doc7 wrote: Wed Jan 12, 2022 10:48 am As stated in my last reply to this quote, Robinhood monthly statements don't seem to indicate wash sales but I will see on the year end. However, I was thinking I would also mention that in the RH account, I never sold a partial lot. Every time I sold it was 100% of my stake. So no robinhood sales would be marked as washes, i think (unless I continued owning the next lots of purchases for extended times, in which case the loss would be in their basis, but this did not occur). However, I know they did wash into my HSA, which Robinhood would not be able to indicate.
If RH says you don't have a wash sale, I feel that the HSA does not either (all shares in both accounts sold by the 29th, when you subsequently bought the losing lots on the 29th and 1st).

ie I think the key is if
  • buy/sell lot 1 for a gain, then
  • buy/sell lot 2 for a loss
  • all within 30 days
triggers a wash. If not, then you don't have a wash sale anywhere (until the final txn on Feb 24th).

However, there was some debate in the other thread about this case. Some people said a literal reading makes the case above a wash sale, with lot 1 adjusted. That only really matters if lot 1 happened to be in a tax advantaged account where you'd lose the wash (instead of just recouping it because lot 1 was already sold). I don't really agree with this and was hoping your test case would prove it one way or the other (at least for what one brokerage thinks).
The only real test case would be a private letter ruling. Audits are dependent on the auditor and brokerages can do whatever they want so long as they follow the reporting rules, which are not nearly as complex.
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Re: Wash Sale Rule - HSA and Taxable

Post by inbox788 »

Lee_WSP wrote: Wed Jan 12, 2022 12:06 pmWhen you completely clear out your position, the net result is no wash sale, so there's no reason for a brokerage to mark it as such.
I despise the wash sale rule and I'm totally confused by all the trades, but if OP began with zero shares and ended with zero shares, whatever wash sale rules that applied all wash out. It's needless complication. If you're out, I don't think it makes a difference how you account for it, separately by each type of account or following each trade adjust for the wash sale rule. But please point out how it might make a difference if there is any.

https://www.irs.gov/irb/2008-03_IRB#RR-2008-5
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

inbox788 wrote: Wed Jan 12, 2022 1:19 pm
Lee_WSP wrote: Wed Jan 12, 2022 12:06 pmWhen you completely clear out your position, the net result is no wash sale, so there's no reason for a brokerage to mark it as such.
I despise the wash sale rule and I'm totally confused by all the trades, but if OP began with zero shares and ended with zero shares, whatever wash sale rules that applied all wash out. It's needless complication. If you're out, I don't think it makes a difference how you account for it, separately by each type of account or following each trade adjust for the wash sale rule. But please point out how it might make a difference if there is any.

https://www.irs.gov/irb/2008-03_IRB#RR-2008-5
Unless the basis adjustments is to tax advantaged shares. At which point the loss is gone forever.
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Re: Wash Sale Rule - HSA and Taxable

Post by AnEngineer »

rkhusky wrote: Tue Jan 11, 2022 8:13 pm I see no basis for believing that HSA's or 401k's are exempt from the wash sale law, other than the mistaken idea that the IRS must list every account type for which the wash sale law applies, when in fact the taxpayer is supposed to find an explicit exemption before proceeding.
One reasonable reading of IRS pub 550 is that since acquiring stock in an IRA are listed completely separately from the more general buying stock, then the buying shares only applies to taxable accounts. If buying stock was meant to include in all accounts (IRA, 401k, HSA), then IRAs would not be listed separately. (This basis is ignorant of the fact that IRS publications have no legal weight.)
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

It appears to me that by the time of the first sale for a loss on 2/3, there were no shares in the HSA, because they had been sold on 1/29. Correct?
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Re: Wash Sale Rule - HSA and Taxable

Post by AnEngineer »

Doc7 wrote: Tue Jan 11, 2022 11:11 amMy belief is that this purchase and sale, on Jan 27th and 29th, potentially negates all capital losses in taxable account for 30 days before and after January 27th.
I don't believe this is true. My understanding is that with a wash sale, you adjust the basis of the first shares bought within the window, so the shares you bought on 1/26 would first get the disallowed loss. How it cascades from there gets complicated and also (maybe?) depends on whether the shares on 1/27 were bought first in taxable or HSA.
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

Further, there was a wash sale on the sales on 2/3, but which one depends on the order of the sales. If the 20 sh was sold first, then there is a wash with the 14 sh purchased on 2/1. This wash is recouped when you sell the 14 sh on 2/3.

I think you end up claiming all your losses.
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Re: Wash Sale Rule - HSA and Taxable

Post by Doc7 »

rkhusky wrote: Wed Jan 12, 2022 2:48 pm It appears to me that by the time of the first sale for a loss on 2/3, there were no shares in the HSA, because they had been sold on 1/29. Correct?
It is correct that on my only sales for losses which occurred on February 3rd, which were $530 in RobinHood and $2200 on Fidelity brokerage, (along with $2.23 loss on February 24), occurred while I had zero tax advantaged shares. (hSA shares were owned from 1/27 - 1/29). I am not sure this is relevant though with the acquired before or after verbiage. I bought shares (when I was at Zero shares market close 1/26) in taxable and HSA on January 27 and sold in both for positive gains on January 29.
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

Doc7 wrote: Wed Jan 12, 2022 3:21 pm
rkhusky wrote: Wed Jan 12, 2022 2:48 pm It appears to me that by the time of the first sale for a loss on 2/3, there were no shares in the HSA, because they had been sold on 1/29. Correct?
It is correct that on my only sales for losses which occurred on February 3rd, which were $530 in RobinHood and $2200 on Fidelity brokerage, (along with $2.23 loss on February 24), occurred while I had zero tax advantaged shares. (hSA shares were owned from 1/27 - 1/29). I am not sure this is relevant though with the acquired before or after verbiage.
Because of the concept of replacement shares. When you sold the shares for a loss there were no replacement shares in the HSA. And I am assuming that you didn't purchase any shares in the HSA after 2/3.
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Re: Wash Sale Rule - HSA and Taxable

Post by AnEngineer »

rkhusky wrote: Wed Jan 12, 2022 3:26 pm
Doc7 wrote: Wed Jan 12, 2022 3:21 pm
rkhusky wrote: Wed Jan 12, 2022 2:48 pm It appears to me that by the time of the first sale for a loss on 2/3, there were no shares in the HSA, because they had been sold on 1/29. Correct?
It is correct that on my only sales for losses which occurred on February 3rd, which were $530 in RobinHood and $2200 on Fidelity brokerage, (along with $2.23 loss on February 24), occurred while I had zero tax advantaged shares. (hSA shares were owned from 1/27 - 1/29). I am not sure this is relevant though with the acquired before or after verbiage.
Because of the concept of replacement shares. When you sold the shares for a loss there were no replacement shares in the HSA. And I am assuming that you didn't purchase any shares in the HSA after 2/3.
Aren't replacement shares a concept created by people trying to interpret the wash sale rules with no basis in law? I think this is what I've read here before.
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

AnEngineer wrote: Wed Jan 12, 2022 3:28 pm Aren't replacement shares a concept created by people trying to interpret the wash sale rules with no basis in law? I think this is what I've read here before.
The IRS creates rules that are not explicitly listed in the law all the time. Someone has to translate the law into practical application. I assume that tax lawyers know about those rules as well as what's in the law.
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

AnEngineer wrote: Wed Jan 12, 2022 2:35 pm
rkhusky wrote: Tue Jan 11, 2022 8:13 pm I see no basis for believing that HSA's or 401k's are exempt from the wash sale law, other than the mistaken idea that the IRS must list every account type for which the wash sale law applies, when in fact the taxpayer is supposed to find an explicit exemption before proceeding.
One reasonable reading of IRS pub 550 is that since acquiring stock in an IRA are listed completely separately from the more general buying stock, then the buying shares only applies to taxable accounts. If buying stock was meant to include in all accounts (IRA, 401k, HSA), then IRAs would not be listed separately. (This basis is ignorant of the fact that IRS publications have no legal weight.)
I haven't seen an explanation from the IRS for why they started including IRA's in the wash sale section. Perhaps it was because there was a ruling around 2008 specific to IRA's (RR 2008-05). Before that, IRA's were not mentioned. Were IRA's exempt from the wash sale rule prior to that ruling? No, because the IRS does not make the law, Congress makes the law. The IRS just got around to issuing a ruling that clarified that IRA's are subject to the wash sale rule - and they had always been subject to the wash sale rule.
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

rkhusky wrote: Wed Jan 12, 2022 3:26 pm
Doc7 wrote: Wed Jan 12, 2022 3:21 pm
rkhusky wrote: Wed Jan 12, 2022 2:48 pm It appears to me that by the time of the first sale for a loss on 2/3, there were no shares in the HSA, because they had been sold on 1/29. Correct?
It is correct that on my only sales for losses which occurred on February 3rd, which were $530 in RobinHood and $2200 on Fidelity brokerage, (along with $2.23 loss on February 24), occurred while I had zero tax advantaged shares. (hSA shares were owned from 1/27 - 1/29). I am not sure this is relevant though with the acquired before or after verbiage.
Because of the concept of replacement shares. When you sold the shares for a loss there were no replacement shares in the HSA. And I am assuming that you didn't purchase any shares in the HSA after 2/3.
Replacement shares are not a thing. It is never mentioned in any regs or rulings as far as I know. The concept simply makes it easier for the lay person to understand. The whole rule and law is simply poorly written.
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Re: Wash Sale Rule - HSA and Taxable

Post by AnEngineer »

rkhusky wrote: Wed Jan 12, 2022 3:42 pm
AnEngineer wrote: Wed Jan 12, 2022 2:35 pm
rkhusky wrote: Tue Jan 11, 2022 8:13 pm I see no basis for believing that HSA's or 401k's are exempt from the wash sale law, other than the mistaken idea that the IRS must list every account type for which the wash sale law applies, when in fact the taxpayer is supposed to find an explicit exemption before proceeding.
One reasonable reading of IRS pub 550 is that since acquiring stock in an IRA are listed completely separately from the more general buying stock, then the buying shares only applies to taxable accounts. If buying stock was meant to include in all accounts (IRA, 401k, HSA), then IRAs would not be listed separately. (This basis is ignorant of the fact that IRS publications have no legal weight.)
I haven't seen an explanation from the IRS for why they started including IRA's in the wash sale section. Perhaps it was because there was a ruling around 2008 specific to IRA's (RR 2008-05). Before that, IRA's were not mentioned. Were IRA's exempt from the wash sale rule prior to that ruling? No, because the IRS does not make the law, Congress makes the law. The IRS just got around to issuing a ruling that clarified that IRA's are subject to the wash sale rule - and they had always been subject to the wash sale rule.
I was just commenting on the "I see no basis for believing" part, not arguing that such a belief is correct.
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Re: Wash Sale Rule - HSA and Taxable

Post by AnEngineer »

Lee_WSP wrote: Wed Jan 12, 2022 3:45 pm
rkhusky wrote: Wed Jan 12, 2022 3:26 pm
Doc7 wrote: Wed Jan 12, 2022 3:21 pm
rkhusky wrote: Wed Jan 12, 2022 2:48 pm It appears to me that by the time of the first sale for a loss on 2/3, there were no shares in the HSA, because they had been sold on 1/29. Correct?
It is correct that on my only sales for losses which occurred on February 3rd, which were $530 in RobinHood and $2200 on Fidelity brokerage, (along with $2.23 loss on February 24), occurred while I had zero tax advantaged shares. (hSA shares were owned from 1/27 - 1/29). I am not sure this is relevant though with the acquired before or after verbiage.
Because of the concept of replacement shares. When you sold the shares for a loss there were no replacement shares in the HSA. And I am assuming that you didn't purchase any shares in the HSA after 2/3.
Replacement shares are not a thing. It is never mentioned in any regs or rulings as far as I know. The concept simply makes it easier for the lay person to understand. The whole rule and law is simply poorly written.
Moreover, here, I don't see how the HSA shares already having been sold makes a difference. What matters is if there is a purchase within 30 days.

Example:
Day 1: buy 1 share for $1.
Day 2: sell 1 share for $2.
Day 3: buy 1 share for $3.
Day 4: sell 1 share for $2 - this is a wash sale because of the purchase on day 1.
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

Lee_WSP wrote: Wed Jan 12, 2022 3:45 pm Replacement shares are not a thing. It is never mentioned in any regs or rulings as far as I know. The concept simply makes it easier for the lay person to understand. The whole rule and law is simply poorly written.
An awful lot of people use the concept. Google wash sale replacement shares.

If you prefer, think of it as a computational tool to figure out the results of wash sales.
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Re: Wash Sale Rule - HSA and Taxable

Post by rkhusky »

AnEngineer wrote: Wed Jan 12, 2022 3:52 pm Moreover, here, I don't see how the HSA shares already having been sold makes a difference. What matters is if there is a purchase within 30 days.

Example:
Day 1: buy 1 share for $1.
Day 2: sell 1 share for $2.
Day 3: buy 1 share for $3.
Day 4: sell 1 share for $2 - this is a wash sale because of the purchase on day 1.
Nope. The IRS instructions say to adjust the basis of the replacement shares. Where are the replacement shares? (Replacement shares = shares bought that trigger the wash sale)
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Lee_WSP
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

AnEngineer wrote: Wed Jan 12, 2022 3:52 pm
Lee_WSP wrote: Wed Jan 12, 2022 3:45 pm
rkhusky wrote: Wed Jan 12, 2022 3:26 pm
Doc7 wrote: Wed Jan 12, 2022 3:21 pm
rkhusky wrote: Wed Jan 12, 2022 2:48 pm It appears to me that by the time of the first sale for a loss on 2/3, there were no shares in the HSA, because they had been sold on 1/29. Correct?
It is correct that on my only sales for losses which occurred on February 3rd, which were $530 in RobinHood and $2200 on Fidelity brokerage, (along with $2.23 loss on February 24), occurred while I had zero tax advantaged shares. (hSA shares were owned from 1/27 - 1/29). I am not sure this is relevant though with the acquired before or after verbiage.
Because of the concept of replacement shares. When you sold the shares for a loss there were no replacement shares in the HSA. And I am assuming that you didn't purchase any shares in the HSA after 2/3.
Replacement shares are not a thing. It is never mentioned in any regs or rulings as far as I know. The concept simply makes it easier for the lay person to understand. The whole rule and law is simply poorly written.
Moreover, here, I don't see how the HSA shares already having been sold makes a difference. What matters is if there is a purchase within 30 days.

Example:
Day 1: buy 1 share for $1.
Day 2: sell 1 share for $2.
Day 3: buy 1 share for $3.
Day 4: sell 1 share for $2 - this is a wash sale because of the purchase on day 1.
according to the regs and all known revenue ruling and private letters it does not make a difference. It's based on date of acquisition.
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Lee_WSP
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Re: Wash Sale Rule - HSA and Taxable

Post by Lee_WSP »

rkhusky wrote: Wed Jan 12, 2022 3:54 pm
Lee_WSP wrote: Wed Jan 12, 2022 3:45 pm Replacement shares are not a thing. It is never mentioned in any regs or rulings as far as I know. The concept simply makes it easier for the lay person to understand. The whole rule and law is simply poorly written.
An awful lot of people use the concept. Google wash sale replacement shares.

If you prefer, think of it as a computational tool to figure out the results of wash sales.
Instructions are not binding. Regs are. Revenue rulings are. Private letter rulings are only binding for that issue.

That the service has so far not cared is irrelevant.
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