Phineas J. Whoopee wrote:
Do you mean that would be the case even if I had sold VFINX, Vanguard S&P 500 Index Fund Investor Shares in my taxable account, and within the wash sale time window bought VINIX, Vanguard Institutional Index Fund in my Vanguard-administered 401(k) (as it happens I do not have such an account)?
I haven't done that. Let me emphasize again I am not asking anybody to explain my own taxes to me. I am suggesting the substantially identical question must have been resolved, and asking if anybody has had any more success than I in finding details.
I've always wondered if something like VTSMX & VFINX would be considered "substantially identical". It seems not, according to the examples in Pub 550. They're different indices, but unless I saw a clear statement from the IRS that different mutual funds (even from the same company) are never considered substantially identical, I'd wonder. (Also, what if you sold VTSMX & bought a total stock market from another company within the wash sale window?)
Regardless of whether Vanguard would have had to flag the trade as a "wash" according to the rules for filling out the 1099, the way I read Pub 550 (2012, p. 59) suggests that you would have a wash sale if you sold in the taxable account, & purchased the same in an IRA account within 30 days (before or after the sale).
You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade,
Acquire a contract or option to buy substantially identical stock or securities, or
Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.
If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.
If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities includes the holding period of the stock or securities sold.
(see also http://www.irs.gov/irb/2008-03_IRB/ar08.html
From the 2012 Sch D Instructions:
If you received a Form 1099-B (or substitute statement), box 5 of that form will show any nondeductible wash sale loss if:
The stock or securities sold were covered securities (defined in the instructions for Form 8949, column (f)), and
The substantially identical stock or securities you bought had the same CUSIP number as the stock or securities you sold and were bought in the same account as the stock or securities you sold.
However, you cannot deduct a loss from a wash sale even if it is not reported on Form 1099-B (or substitute statement). For more details on wash sales, see Pub. 550.
Report a wash sale transaction in Part I or Part II (depending on how long you owned the stock or securities) of Form 8949 with the appropriate box (A, B, or C) checked. Complete all columns. Enter "W" in column (f). Enter as a positive number in column (g) the amount of the loss not allowed. See the instructions for Form 8949, columns (f), (g), and (h).