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wash sales

Posted: Wed Mar 13, 2019 11:29 am
by Figuring_it_out
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?

Re: wash sales

Posted: Wed Mar 13, 2019 11:34 am
by rkhusky
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.

Re: wash sales

Posted: Wed Mar 13, 2019 11:35 am
by Gufomel
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.

Re: wash sales

Posted: Wed Mar 13, 2019 2:11 pm
by Earl Lemongrab
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.

Re: wash sales

Posted: Wed Mar 13, 2019 7:40 pm
by smarcus3
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.