Tax Loss Harvesting Scenario

[drkevinmc]

Wash Sale Question:
Let's say that I bought $5,000 of VTI one week ago, but in my overall portfolio, my position in VTI has a total loss of $25,000. If I were to sell all of my VTI shares today, I realize I have a wash sale because I purchased $5,000 of the same VTI just two weeks ago but would I still be able to claim a loss of $20,000? ($25,000 loss minus the $5,000 recently purchased) Or how exactly does that work? Is it best just to wait a full 31 days and hope it keeps going down?

[sycamore]

Wash Sale Question:
Let's say that I bought $5,000 of VTI one week ago, but in my overall portfolio, my position in VTI has a total loss of $25,000. If I were to sell all of my VTI shares today, I realize I have a wash sale because I purchased $5,000 of the same VTI just two weeks ago but would I still be able to claim a loss of $20,000? ($25,000 loss minus the $5,000 recently purchased) Or how exactly does that work? Is it best just to wait a full 31 days and hope it keeps going down?

In a wash sale, the disallowed loss amount is transferred to the basis of the so-called replacement shares. I.e., in your case the ones you bought two weeks ago.

When you sell all shares, those replacement shares simply have a higher basis (and thus a smaller gain or greater loss compared to their original basis), and thus the full $25k loss will be realized.

Basically, if you sell all shares, (and don't buy any replacement VTI or VTSAX shares within 31 days from the sale date) then you'll get to claim the full loss.

* The above assumes that all your Vanguard Total Stock Market Index fund is in a taxable account, not tax advantaged accounts (when the wash sale amount is transferred to those accounts, the loss amount is lost forever)