Quick TLH/wash sale question

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davos8923
Posts: 16
Joined: Sat Mar 03, 2018 1:14 pm

Quick TLH/wash sale question

Post by davos8923 » Tue Oct 30, 2018 8:55 am

Hello,

I opened my first ever taxable account a few months back with about $76k in VTSAX. It's now worth about $70k, and I'd like to harvest.

The (possible) issue: my retirement contributions go to a SIMPLE IRA every other week, and into VTSAX. This has occurred within the past 30 days. I could stop it going forward, but is my only option (to avoid wash sale) to stop them now and then just wait 30 days and harvest then assuming market hasn't fully rebounded?

Longer term: should I just stop contributing in my retirement account into the same fund I use in taxable (i.e. VTSAX) to avoid this issue in the future? In my situation currently I don't know when the market will go down, but then when it does, I can't even immediately harvest due to VTSAX retirement contributions each month.

rkhusky
Posts: 5889
Joined: Thu Aug 18, 2011 8:09 pm

Re: Quick TLH/wash sale question

Post by rkhusky » Tue Oct 30, 2018 9:44 am

davos8923 wrote:
Tue Oct 30, 2018 8:55 am
The (possible) issue: my retirement contributions go to a SIMPLE IRA every other week, and into VTSAX. This has occurred within the past 30 days. I could stop it going forward, but is my only option (to avoid wash sale) to stop them now and then just wait 30 days and harvest then assuming market hasn't fully rebounded?

Longer term: should I just stop contributing in my retirement account into the same fund I use in taxable (i.e. VTSAX) to avoid this issue in the future? In my situation currently I don't know when the market will go down, but then when it does, I can't even immediately harvest due to VTSAX retirement contributions each month.
You could move all the VTSAX in the IRA to something else and then there would be no replacement shares in the IRA, and hence no wash sale. Then you wouldn't have to wait the 30 days. Just make sure you don't buy anymore VTSAX for 30 days.

It is easier to manage if you don't duplicate funds between taxable and tax-advantaged.

davos8923
Posts: 16
Joined: Sat Mar 03, 2018 1:14 pm

Re: Quick TLH/wash sale question

Post by davos8923 » Tue Oct 30, 2018 10:14 am

rkhusky wrote:
Tue Oct 30, 2018 9:44 am
davos8923 wrote:
Tue Oct 30, 2018 8:55 am
The (possible) issue: my retirement contributions go to a SIMPLE IRA every other week, and into VTSAX. This has occurred within the past 30 days. I could stop it going forward, but is my only option (to avoid wash sale) to stop them now and then just wait 30 days and harvest then assuming market hasn't fully rebounded?

Longer term: should I just stop contributing in my retirement account into the same fund I use in taxable (i.e. VTSAX) to avoid this issue in the future? In my situation currently I don't know when the market will go down, but then when it does, I can't even immediately harvest due to VTSAX retirement contributions each month.
You could move all the VTSAX in the IRA to something else and then there would be no replacement shares in the IRA, and hence no wash sale. Then you wouldn't have to wait the 30 days. Just make sure you don't buy anymore VTSAX for 30 days.

It is easier to manage if you don't duplicate funds between taxable and tax-advantaged.
Thanks for your reply. So to make sure I'm understanding ... VTSAX purchases within past 30 days in my IRA are irrelevant for purpose of wash sale violation so long as 100% of my VTSAX IRA balance is all sold the same day as I sell the taxable? Or only need to sell the exact VTSAX IRA share amounts I purchased in last 30 days?

ivk5
Posts: 479
Joined: Thu Sep 22, 2016 9:05 am

Re: Quick TLH/wash sale question

Post by ivk5 » Tue Oct 30, 2018 10:36 am

There are different views here on this exact question based on ambiguity in the regs. My interpretation is that selling the IRA shares does not avoid a (partial) wash sale, and that the only way to do that is to wait. You can search recent threads for the discussion.

rkhusky
Posts: 5889
Joined: Thu Aug 18, 2011 8:09 pm

Re: Quick TLH/wash sale question

Post by rkhusky » Tue Oct 30, 2018 11:06 am

davos8923 wrote:
Tue Oct 30, 2018 10:14 am
Thanks for your reply. So to make sure I'm understanding ... VTSAX purchases within past 30 days in my IRA are irrelevant for purpose of wash sale violation so long as 100% of my VTSAX IRA balance is all sold the same day as I sell the taxable? Or only need to sell the exact VTSAX IRA share amounts I purchased in last 30 days?
From what I understand, once the funds are within an IRA, you can't specify which shares are sold. So, you have to sell all the VTSAX shares to make sure you get the recently purchased ones. I would sell all the shares in the IRA and then the next day sell the shares in taxable. If you put both orders in on the same day, what with Murphy's Law, the brokerage would surely sell the taxable shares first and then you would have a wash sale equal to the number of shares that you recently purchased in the IRA.

Note that if the number of shares being sold in the taxable account is significantly greater than the number of shares bought within the past 30 days in the IRA, you might not really care if you have a small partial wash sale.

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