A question about wash sale rule

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
User avatar
Topic Author
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

A question about wash sale rule

Post by Hector » Wed Sep 11, 2019 11:55 am

If I am making multiple trades of same fund and automatically reinvest dividends and gains, I would have a mess of wash sale. I don't need to worry about wash sale if I sell that fund before year end. is my understanding correct?

Here is more detail:
HSA is not tax deferred account in California.
In fidelity HSA in California, I hold fund for amount (less than $1,000) which is not enough to buy individual bonds.
When I receive interest from individual bond, I buy fund from it. I also reinvest dividend from fund.
Sometime I sell fund to have enough to buy individual bond.

As a result this is how my current fund holding's cost basis looks:

Code: Select all

Acquired	Term		Total		Value		Quantity	Cost Basis	Cost Basis
			Gain/Loss						Per Share	
8/13/19		Short		$0.00 		$0.43 		0.041		$10.49 		$0.43  W
			0.50%				
8/13/19		Short		($0.03)		$36.47 		3.461		$10.55 		$36.51 
			-0.09%				
7/15/19		Short		$0.05 		$10.75 		1.02		$10.49 		$10.70 
			0.47%				
7/11/19		Short		$0.11 		$20.34 		1.93		$10.48 		$20.23 
			0.55%				
6/28/19		Short		$0.00 		$0.23 		0.022		$10.45 		$0.23 
			0.82%				
6/12/19		Short		$1.14 		$200.08 	18.983		$10.48 		$198.94 
			0.57%				
Previous completed transactions:

Code: Select all

 Date		Action	Quantity	Price ($)	Amount ($)	Settlement Date
 09/10/2019	SOLD	-1.793		10.54		18.9	 	09/11/2019
 08/30/2019	BOUGHT	0.041		10.59		-0.43	 
 08/13/2019	BOUGHT	5.218		10.55		-55.05	 	08/14/2019
 07/31/2019	BOUGHT	0.036		10.49		-0.38	 
 07/15/2019	BOUGHT	1.02		10.49		-10.7	 	07/16/2019
 07/11/2019	BOUGHT	1.93		10.48		-20.23	 	07/12/2019
 07/10/2019	SOLD	-4.766		10.49		50	 	07/11/2019
 06/28/2019	BOUGHT	0.022		10.52		-0.23	 
 06/14/2019	BOUGHT	3.588		10.49		-37.64		 06/17/2019
This has incurred wash sale (Fidelity indicated it by showing W in cost basis).
I am going to keep making transactions like this which will cause more was sale.
What is the best way to handle wash sale?

I am thinking to sell this fund before year end and buy it again next year after 31(61?) days.
Since it is small amount, I am not worried about capital gain tax when filing California income tax return.
Last edited by Hector on Wed Sep 11, 2019 5:12 pm, edited 3 times in total.

Silk McCue
Posts: 2880
Joined: Thu Feb 25, 2016 7:11 pm

Re: A question about wash sale rule

Post by Silk McCue » Wed Sep 11, 2019 12:39 pm

A Wash sale only comes into play if you are trying to Tax Loss harvest a holding. It is not clear from your post that you are doing that. There is no concept of anything I know where it matters whether or not you sell the fund by the end of the year. You can buy and sell funds all day long without concern other than paying taxes on any gains.

Without using the phrase wash sale, please describe your concern.

Cheers

livesoft
Posts: 67835
Joined: Thu Mar 01, 2007 8:00 pm

Re: A question about wash sale rule

Post by livesoft » Wed Sep 11, 2019 3:11 pm

Hector wrote:
Wed Sep 11, 2019 11:55 am
If I am making multiple trades of same fund and automatically reinvest dividends and gains, I would have a mess of wash sale. I don't need to worry about wash sale if I sell that fund before year end. is my understanding correct?
It will probably depend on your broker and how they account for (or don't account for) wash sales on the 1099-B that they send you.
Wiki This signature message sponsored by sscritic: Learn to fish.

User avatar
Topic Author
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: A question about wash sale rule

Post by Hector » Wed Sep 11, 2019 3:14 pm

In fidelity HSA, I hold fund for amount (less than $1,000) which is not enough to buy individual bonds.
When I receive interest from individual bond, I buy fund from it. I also reinvest dividend from fund.
Sometime I sell fund to have enough to buy individual bond.

As a result this is how my current fund holding's cost basis looks:

Code: Select all

Acquired	Term		Total		Value		Quantity	Cost Basis	Cost Basis
			Gain/Loss						Per Share	
8/13/19		Short		$0.00 		$0.43 		0.041		$10.49 		$0.43  W
			0.50%				
8/13/19		Short		($0.03)		$36.47 		3.461		$10.55 		$36.51 
			-0.09%				
7/15/19		Short		$0.05 		$10.75 		1.02		$10.49 		$10.70 
			0.47%				
7/11/19		Short		$0.11 		$20.34 		1.93		$10.48 		$20.23 
			0.55%				
6/28/19		Short		$0.00 		$0.23 		0.022		$10.45 		$0.23 
			0.82%				
6/12/19		Short		$1.14 		$200.08 	18.983		$10.48 		$198.94 
			0.57%				
Previous completed transactions:

Code: Select all

 Date		Action	Quantity	Price ($)	Amount ($)	Settlement Date
 09/10/2019	SOLD	-1.793		10.54		18.9	 	09/11/2019
 08/30/2019	BOUGHT	0.041		10.59		-0.43	 
 08/13/2019	BOUGHT	5.218		10.55		-55.05	 	08/14/2019
 07/31/2019	BOUGHT	0.036		10.49		-0.38	 
 07/15/2019	BOUGHT	1.02		10.49		-10.7	 	07/16/2019
 07/11/2019	BOUGHT	1.93		10.48		-20.23	 	07/12/2019
 07/10/2019	SOLD	-4.766		10.49		50	 	07/11/2019
 06/28/2019	BOUGHT	0.022		10.52		-0.23	 
 06/14/2019	BOUGHT	3.588		10.49		-37.64		 06/17/2019
This has incurred wash sale (Fidelity indicated it by showing W in cost basis).
I am going to keep making transactions like this which will cause more was sale.
What is the best way to handle wash sale?

I am thinking to sell this fund before year end and buy it again next year after 31(61?) days.
Since it is small amount, I am not worried about capital gain tax when filing California income tax return.

Silk McCue
Posts: 2880
Joined: Thu Feb 25, 2016 7:11 pm

Re: A question about wash sale rule

Post by Silk McCue » Wed Sep 11, 2019 4:11 pm

There are no tax consequences for these actions within a tax deferred account such as this HSA. So the W for wash means nothing. If you held the same fund in a Taxable account and tried to Tax Loss Harvest then you might have something to be worried about.

Cheers

User avatar
Topic Author
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: A question about wash sale rule

Post by Hector » Wed Sep 11, 2019 4:13 pm

Silk McCue wrote:
Wed Sep 11, 2019 4:11 pm
There are no tax consequences for these actions within a tax deferred account such as this HSA. So the W for wash means nothing. If you held the same fund in a Taxable account and tried to Tax Loss Harvest then you might have something to be worried about.

Cheers
HSA is not tax deferred account in California.

MotoTrojan
Posts: 5865
Joined: Wed Feb 01, 2017 8:39 pm

Re: A question about wash sale rule

Post by MotoTrojan » Wed Sep 11, 2019 4:16 pm

Hector wrote:
Wed Sep 11, 2019 4:13 pm
Silk McCue wrote:
Wed Sep 11, 2019 4:11 pm
There are no tax consequences for these actions within a tax deferred account such as this HSA. So the W for wash means nothing. If you held the same fund in a Taxable account and tried to Tax Loss Harvest then you might have something to be worried about.

Cheers
HSA is not tax deferred account in California.
Extra tricky since they probably aren't reporting this well anyways.

I don't know what this year end rule is, if you want to avoid the wash you should sell the new reinvested shares (ideally also at a loss) together with the other one, then there is no wash sale to worry about. I personally would find a new way to massage this because I hate dealing with tax-forms and I doubt a CA based HSA does any of this automatically, like Vanguard does.

rkhusky
Posts: 7043
Joined: Thu Aug 18, 2011 8:09 pm

Re: A question about wash sale rule

Post by rkhusky » Wed Sep 11, 2019 4:30 pm

If you completely sell out of an investment that had wash sales and all the replacement shares were purchased in a taxable account, you will have recouped all the wash sale disallowments, and the only affect will be a load of paperwork to process for your taxes (and assuming if there is a loss, that you don't repurchase for 30 days after the sale).

User avatar
Topic Author
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: A question about wash sale rule

Post by Hector » Wed Sep 11, 2019 4:32 pm

MotoTrojan wrote:
Wed Sep 11, 2019 4:16 pm
Hector wrote:
Wed Sep 11, 2019 4:13 pm
Silk McCue wrote:
Wed Sep 11, 2019 4:11 pm
There are no tax consequences for these actions within a tax deferred account such as this HSA. So the W for wash means nothing. If you held the same fund in a Taxable account and tried to Tax Loss Harvest then you might have something to be worried about.

Cheers
HSA is not tax deferred account in California.
Extra tricky since they probably aren't reporting this well anyways.

I don't know what this year end rule is, if you want to avoid the wash you should sell the new reinvested shares (ideally also at a loss) together with the other one, then there is no wash sale to worry about. I personally would find a new way to massage this because I hate dealing with tax-forms and I doubt a CA based HSA does any of this automatically, like Vanguard does.
I mentioned year end because I need to do this (sell all shares of fund) only once a year if I do it at the end of year.

User avatar
Topic Author
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: A question about wash sale rule

Post by Hector » Wed Sep 11, 2019 4:33 pm

rkhusky wrote:
Wed Sep 11, 2019 4:30 pm
If you completely sell out of an investment that had wash sales and all the replacement shares were purchased in a taxable account, you will have recouped all the wash sale disallowments, and the only affect will be a load of paperwork to process for your taxes (and assuming if there is a loss, that you don't repurchase for 30 days after the sale).
I would not replace them in taxable account.

rkhusky
Posts: 7043
Joined: Thu Aug 18, 2011 8:09 pm

Re: A question about wash sale rule

Post by rkhusky » Wed Sep 11, 2019 4:37 pm

Hector wrote:
Wed Sep 11, 2019 4:33 pm
rkhusky wrote:
Wed Sep 11, 2019 4:30 pm
If you completely sell out of an investment that had wash sales and all the replacement shares were purchased in a taxable account, you will have recouped all the wash sale disallowments, and the only affect will be a load of paperwork to process for your taxes (and assuming if there is a loss, that you don't repurchase for 30 days after the sale).
I would not replace them in taxable account.
If replacement shares were purchased in a tax-advantaged account, the losses are permanently disallowed.

One option is to not claim the losses on your taxes. Then you don't have to worry about wash sales.

Silk McCue
Posts: 2880
Joined: Thu Feb 25, 2016 7:11 pm

Re: A question about wash sale rule

Post by Silk McCue » Wed Sep 11, 2019 5:06 pm

Hector wrote:
Wed Sep 11, 2019 4:13 pm
Silk McCue wrote:
Wed Sep 11, 2019 4:11 pm
There are no tax consequences for these actions within a tax deferred account such as this HSA. So the W for wash means nothing. If you held the same fund in a Taxable account and tried to Tax Loss Harvest then you might have something to be worried about.

Cheers
HSA is not tax deferred account in California.
More detail in your first post would be helpful and make better use of the time that others invest in trying to assist you.

Cheers
Last edited by Silk McCue on Wed Sep 11, 2019 6:11 pm, edited 1 time in total.

User avatar
Topic Author
Hector
Posts: 1085
Joined: Fri Dec 24, 2010 2:21 pm
Contact:

Re: A question about wash sale rule

Post by Hector » Wed Sep 11, 2019 5:10 pm

rkhusky wrote:
Wed Sep 11, 2019 4:37 pm
Hector wrote:
Wed Sep 11, 2019 4:33 pm
rkhusky wrote:
Wed Sep 11, 2019 4:30 pm
If you completely sell out of an investment that had wash sales and all the replacement shares were purchased in a taxable account, you will have recouped all the wash sale disallowments, and the only affect will be a load of paperwork to process for your taxes (and assuming if there is a loss, that you don't repurchase for 30 days after the sale).
I would not replace them in taxable account.
If replacement shares were purchased in a tax-advantaged account, the losses are permanently disallowed.

One option is to not claim the losses on your taxes. Then you don't have to worry about wash sales.
I should have said, I wont replace them at all for minimum required duration (for 31 days).

rkhusky
Posts: 7043
Joined: Thu Aug 18, 2011 8:09 pm

Re: A question about wash sale rule

Post by rkhusky » Wed Sep 11, 2019 5:21 pm

Hector wrote:
Wed Sep 11, 2019 5:10 pm
I should have said, I wont replace them at all for minimum required duration(31?).
Good to go then.

Post Reply