wash sales

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Figuring_it_out
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Joined: Sun Jan 07, 2018 9:54 am

wash sales

Post by Figuring_it_out » Wed Mar 13, 2019 11:29 am

Has there been a definition set by the IRS on wash sales for index fundes? (definition of substantially identical)

Obviously selling one S&P 500 fund and buying another one or EFT is substantially identical. Does the brokerage flag this or only the IRS?

What about selling a S&P 500 fund an buying a Russell 4000 fund. The two funds track well but are different.

how about selling SPY and buying DIA? all of the DIA stocks are in the SPY.

Last is selling XOM and buying the XLE energy ETF which is 20+% XOM in its holdings?

rkhusky
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Joined: Thu Aug 18, 2011 8:09 pm

Re: wash sales

Post by rkhusky » Wed Mar 13, 2019 11:34 am

Figuring_it_out wrote:
Wed Mar 13, 2019 11:29 am
Has there been a definition set by the IRS on wash sales for index fundes? (definition of substantially identical)
The IRS has provided no specific guidance on the meaning of substantially identical for index mutual funds.

You can find arguments for or against wash sales for all your examples.

Brokerages are only required to flag wash sales between investments with the same CUSIP (i.e. identical investments) in the same account and this is all they generally report.
Last edited by rkhusky on Wed Mar 13, 2019 11:36 am, edited 1 time in total.

Gufomel
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Re: wash sales

Post by Gufomel » Wed Mar 13, 2019 11:35 am

No word from the IRS.

General consensus seems to be that funds/ETFs that track different indexes are fine. But again, no word from the IRS.

Selling XOM to buy an Energy ETF would almost certainly not trigger a wash sale. But again, no word from the IRS.

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Earl Lemongrab
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Re: wash sales

Post by Earl Lemongrab » Wed Mar 13, 2019 2:11 pm

Figuring_it_out wrote:
Wed Mar 13, 2019 11:29 am
Has there been a definition set by the IRS on wash sales for index fundes? (definition of substantially identical)

Obviously selling one S&P 500 fund and buying another one or EFT is substantially identical. Does the brokerage flag this or only the IRS?
You're wrong, that is not obvious at all. I am one who follows the principle that securities (including mutual funds and ETFs) from different companies are never substantially identical.

I happily did a TLH exchanging VOO with IVV.

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smarcus3
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Location: USA

Re: wash sales

Post by smarcus3 » Wed Mar 13, 2019 7:40 pm

To Earl's point there is no guidance so both sides argue with each other. Decide for yourself and move forward. Unfortunately no one can give you an exact answer for what is or isn't.

I would definitely buy and sell with two different ETFs which track to slightly different funds.
This is my personal opinion. I'm an engineer not a financial advisor.

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