Real-life, real-time wash sale & TLH documented

[overst33r]

I love love love manual calculations. One can find mistakes in the automatic things that brokers send you. Also, my spouse's company always makes mistakes in the first W-2 that they send out. If we didn't understand taxes and paycheck stubs, we would end up paying more taxes due to mistakes by the payroll department.

Can you please elaborate on the mistakes you have caught on the paystubs? I'd like to verify mine.

[livesoft]

Can you please elaborate on the mistakes you have caught on the paystubs? I'd like to verify mine.

1. They include health insurance premiums in box 1 of the W-2, so they get taxed when they should not get taxed.
2. They include FICA taxes in HSA contributions, when they should not.
3. They mess up FSA things.
4. They deduct the wrong amounts for insurance. For instance "Individual" instead of "Family" rates.
5. They miscalculate 401(k) matching.

Believe, if something can go wrong on a paycheck, then my spouse's firm has probably committed the error.

I would urge folks to undestand every single number on their paychecks and on their W-2 when they get them.

[EnthusiasticLearner]

Can you please elaborate on the mistakes you have caught on the paystubs? I'd like to verify mine.

My firm was charging me the rate for 15 times my salary in Voluntary Accident Insurance even though our employee benefits handbook states the coverage cannot be more than ten time the employee's annual earnings. In other words, the insurance itself was correct, but the deduction amount was wrong. I would never had know if I didn't go over my paystub with a fine tooth comb. I was refunded $60 after I caught and HR confirmed the error. In addition, we receive reissued W2s most years. I'm at an AmLaw100 firm and previously worked at much smaller employers so it came as a surprise to me that the more well-known and reputible employer has so many mistakes. I agree, always check paystubs.

Livesoft, thank you for this post! This is my first year tax gain harvesting (0% LT) and I admittedly lack confidence. That is mostly because not all accounts are at Vanguard but they will be by this time next year. This post is sure to be a great reference to me and countless others.

[ND Fan 1]

Ok, after reading this thread, I think I'm going to try this TLH. I bought some VG LifeStrategy Growth Fund in August right before the dip. That lot has about a $1500 loss. I had dividends reinvest on 18 Dec. Then I bought another 1K on 4 Jan (before I thought about TLH). So 2 lots purchased within the last 30 days. If I sell all 3 lots, I will trigger a wash sale, correct? However reading this thread VG will take care of the adjustment and paperwork?

Starting now all dividends go to my MMF, so I have less lots and can track better

[livesoft]

If I sell all 3 lots, I will trigger a wash sale, correct? However reading this thread VG will take care of the adjustment and paperwork?

I doubt there will be a wash sale (see this post above viewtopic.php?p=2719998#p2719998, did you miss it?), but if so, yes Vanguard should take care of accounting for it.

[ND Fan 1]

If I sell all 3 lots, I will trigger a wash sale, correct? However reading this thread VG will take care of the adjustment and paperwork?

I doubt there will be a wash sale (see this post above viewtopic.php?p=2719998#p2719998, did you miss it?), but if so, yes Vanguard should take care of accounting for it.

Thank you is that because I'm selling the lots that would have to be adjusted due to the sale of the first lot? If I kept the last 2 lots, those would have to be adjusted due to wash sale rule?

Another scenario. Sold VWO for a loss on 14 dec in a taxable account at Wealthfront. Then bought some VWO in my wife's IRA at VG on 6 jan, oops. The wealthfront is a joint account. Could I now sell the VWO completely and wipe away the wash sale? Or at least I wouldn't have to deal with it going forward. I probably have to account for this somewhere? Forgot about the 30 day BEFORE rule.

[livesoft]

Thank you is that because I'm selling the lots that would have to be adjusted due to the sale of the first lot?
Yes.
If I kept the last 2 lots, those would have to be adjusted due to wash sale rule?
Yes.

Another scenario. Sold VWO for a loss on 14 dec in a taxable account at Wealthfront. Then bought some VWO in my wife's IRA at VG on 6 jan, oops. The wealthfront is a joint account. Could I now sell the VWO completely and wipe away the wash sale?
No. I did the same thing (noted above) and will have to show the wash sale on my tax return (and will document this in a future post when I get the Vanguard 1099-B).
Or at least I wouldn't have to deal with it going forward. I probably have to account for this somewhere?
Yes. On your tax return.
Forgot about the 30 day BEFORE rule.

[ND Fan 1]

Thank you is that because I'm selling the lots that would have to be adjusted due to the sale of the first lot?
Yes.
If I kept the last 2 lots, those would have to be adjusted due to wash sale rule?
Yes.

Another scenario. Sold VWO for a loss on 14 dec in a taxable account at Wealthfront. Then bought some VWO in my wife's IRA at VG on 6 jan, oops. The wealthfront is a joint account. Could I now sell the VWO completely and wipe away the wash sale?
No. I did the same thing (noted above) and will have to show the wash sale on my tax return (and will document this in a future post when I get the Vanguard 1099-B).
Or at least I wouldn't have to deal with it going forward. I probably have to account for this somewhere?
Yes. On your tax return.
Forgot about the 30 day BEFORE rule.

Thank you Livesoft. I figured as much for the VWO sale. I will see if I can read up on how to document it and then will look forward to your post so I can get it right. Wow, this thread has been so helpful. I think I may actually try and TLH myself. Though I'm in the 15% bracket, I will take any tax deduction I can get.

[Doc]

Thank you is that because I'm selling the lots that would have to be adjusted due to the sale of the first lot?
Yes.
If I kept the last 2 lots, those would have to be adjusted due to wash sale rule?
Yes.

Another scenario. Sold VWO for a loss on 14 dec in a taxable account at Wealthfront. Then bought some VWO in my wife's IRA at VG on 6 jan, oops. The wealthfront is a joint account. Could I now sell the VWO completely and wipe away the wash sale?
No. I did the same thing (noted above) and will have to show the wash sale on my tax return (and will document this in a future post when I get the Vanguard 1099-B).
Or at least I wouldn't have to deal with it going forward. I probably have to account for this somewhere?
Yes. On your tax return.
Forgot about the 30 day BEFORE rule.

Thank you Livesoft. I figured as much for the VWO sale. I will see if I can read up on how to document it and then will look forward to your post so I can get it right. Wow, this thread has been so helpful. I think I may actually try and TLH myself. Though I'm in the 15% bracket, I will take any tax deduction I can get.

Expanding on Livesoft's first point. Sell all of them to avoid problems. Vanguard is currently having an issue with changing Spec ID trades to FIFO. This could mess up your intent. viewtopic.php?f=10&t=181258

On the second point understand that you are going to lose the loss because it is disallowed in the taxable trade but "adjusts" the replacement trade which is in tax advantaged and the loss doesn't reduce taxes. (I don't think it even needs to be adjusted. Adjusting the replacement shares may even mean increased taxes if it's not a ROTH.) Note also that a broker is not required to report a wash sale that is caused by trades in different account which is why Livesoft suggests that you will have to make the adjustments yourself. Caveat emptor.

[DoubleClick]

Hi livesoft, I have a few questions about partial wash sales.

Question 1: If I did:

2016/1/5: sold 1000 XYZ at a loss of $2 each
2016/1/5: sold 500 XYZ at a loss of $1 each
2016/1/12: bought 250 XYZ (oops)

I use SpecID everywhere. In this case, can I pick which of the shares I sold on 2016/1/5 to mark as a wash sale, so that I can maximize my loss for TLH?

Question 2: In the above scenario, if this was done across two Vanguard accounts, will Vanguard catch these as a wash sale? I don't seem to see any indication thus far.

Question 3: Is there anything I can do now to fix this and avoid the wash sale? Selling 250 XYZ now won't make the wash sale go away, right?

Thanks!

[livesoft]

Quick answer to both questions: I don't know. Sorry!

A3: You can sell and the disallowed loss with be applied and in a sense go away. It really isn't a problem to have a wash sale, so what's the worry?

[crit]

Livesoft, I have another (probably basic) question. I've TLH'd so far without really worrying about timing, and been fine. I'm a bit of a newbie at the actual transaction process, though.

I TLH'd Monday, put in the order to sell at ~3pm. I thought it was $x,500 of a loss. My account cost basis at end of the day said the end-of-day cost basis loss was $x,500. When the sale was actually reported today, Thursday, it came out as selling on Monday, but for $x,300 loss. NBD, got my harvest, but I'd like to know more than I apparently do.

So, two questions: when is the price determined? And how (in a practical sense, like, website, or holding) do you follow that during a day, or set the price that you want to sell at? Right now my understanding is "TLH when it's a bunch down" and that works, but I'd like to have a bit more precise of an understanding of the nuts and bolts of what I'm doing.

[DoubleClick]

A3: You can sell and the disallowed loss with be applied and in a sense go away. It really isn't a problem to have a wash sale, so what's the worry?

Thanks for the quick response! So if I sell XYZ immediately, the original loss will be allowed again? If so, how? - I'm not understanding this.

Of course, my problem with having an unintentional wash sale is, I shot myself in the foot and lost an opportunity to TLH.

[DoubleClick]

I TLH'd Monday, put in the order to sell at ~3pm. I thought it was $x,500 of a loss. My account cost basis at end of the day said the end-of-day cost basis loss was $x,500. When the sale was actually reported today, Thursday, it came out as selling on Monday, but for $x,300 loss. NBD, got my harvest, but I'd like to know more than I apparently do.

So, two questions: when is the price determined?

Was this a mutual fund or ETF/stock? If the former, the price is not known until after close of the day. If the latter, the price is exactly what your executed order shows within seconds of the transaction being completed.

[crit]

Mutual fund, so I was expecting the end-of-Monday price, which showed as giving me an $x,500 loss, to be the final price.

[livesoft]

Here is a post with some 6th grade math that might be helpful:
viewtopic.php?p=2753712#p2753712

[Doc]

Hi livesoft, I have a few questions about partial wash sales.

Question 1: If I did:

2016/1/5: sold 1000 XYZ at a loss of $2 each
2016/1/5: sold 500 XYZ at a loss of $1 each
2016/1/12: bought 250 XYZ (oops)

I use SpecID everywhere. In this case, can I pick which of the shares I sold on 2016/1/5 to mark as a wash sale, so that I can maximize my loss for TLH?

Question 2: In the above scenario, if this was done across two Vanguard accounts, will Vanguard catch these as a wash sale? I don't seem to see any indication thus far.

Question 3: Is there anything I can do now to fix this and avoid the wash sale? Selling 250 XYZ now won't make the wash sale go away, right?

Thanks!

No you don't get to choose. You didn't supply the necessary data for a definitive answer but it's not the sold date that is important. It is the original buy date that is "supposed" to determine which shares are treated as the "wash". It can get complicted. See "Wash Sale Matching Rules" http://www.fairmark.com/capgain/wash/wsmech.htm for a discussion. I think it is first shares bought but check to be sure.

Note: One of our favorite brokers is having difficulty applying the IRS regs.

[livesoft]

My bolding and underlining:

Match those shares with the earliest shares you bought in the wash sale period until you've matched all the shares ....

This by itself suggests that one does not look at [unsold] shares that were purchased outside the wash sale period. That is, the first (and indeed any) [unsold] shares bought more than 31 days before the sale do not get their cost basis adjusted under any circumstances.

[DoubleClick]

No you don't get to choose. You didn't supply the necessary data for a definitive answer but it's not the sold date that is important. It is the original buy date that is "supposed" to determine which shares are treated as the "wash". It can get complicted. See "Wash Sale Matching Rules" http://www.fairmark.com/capgain/wash/wsmech.htm for a discussion. I think it is first shares bought but check to be sure.

Note: One of our favorite brokers is having difficulty applying the IRS regs.

Thanks, Doc! Looks like I just got kicked into some new cavernous depths in IRS-land.

Lesson: accidental wash sales can potentially be a lot more expensive (in terms of time/effort) than the TLH opportunity lost.

[Bustoff]

TLH 101 question here.

If I sell Vanguard Total Stock Market (VTI) in my taxable account at a loss and buy Vanguard 500 Index Fund (VOO) in my IRA that same day, the wash sale rule does not apply right? And I still get to deduct the loss ?

[livesoft]

Right. As long as those are the only two transactions in your life. Sometimes posters reveal further information that they neglected to tell us about that does create a wash sale.

[Bustoff]

Right. As long as those are the only two transactions in your life. Sometimes posters reveal further information that they neglected to tell us about that does create a wash sale.

Thanks Livesoft.
Well, I'm also considering selling Vanguard Total Intl Stock Index Admiral (VTIAX) in taxable to buy Vanguard FTSE All-World ex-US in tax-advantaged. But that's all.

[Compound]

Livesoft,

I just wanted to say thank you for doing this public service post. I'm looking forward to seeing your update when the tax documentation comes.

As you'll probably remember, I was concerned about TLH and automatic investing (see: viewtopic.php?f=1&t=173256&p=2614467#p2613322) and your post here has assuaged a lot of my concerns. Truthfully, I'm still a complete newbie to the workings of TLH and wash sale rules, so I hope that with time and experience, I will come to fully understand how this stuff works. That said, I'm planning to start taxable investing later this year; you've convinced me that I should be fine doing automatic investing and TLH.

Again, a big thank you for helping us out with this!

Compound

[Drewman]

Thanks for posting!

Any chance you have this in a nice clean PDF or WORD document?

[livesoft]

Thanks for posting!

Any chance you have this in a nice clean PDF or WORD document?

Have at it yourself and send it to me. I don't have it.

[crit]

Livesoft, I have another (probably basic) question. I've TLH'd so far without really worrying about timing, and been fine. I'm a bit of a newbie at the actual transaction process, though.

I TLH'd Monday, put in the order to sell at ~3pm. I thought it was $x,500 of a loss. My account cost basis at end of the day said the end-of-day cost basis loss was $x,500. When the sale was actually reported today, Thursday, it came out as selling on Monday, but for $x,300 loss. NBD, got my harvest, but I'd like to know more than I apparently do.

So, two questions: when is the price determined? And how (in a practical sense, like, website, or holding) do you follow that during a day, or set the price that you want to sell at? Right now my understanding is "TLH when it's a bunch down" and that works, but I'd like to have a bit more precise of an understanding of the nuts and bolts of what I'm doing.

Answering my own question:

For mutual-fund to mutual-fund exchanges (ie tax loss harvest exchanges), the sold price will be that end-of-day's price, as long as you get the order in by 4p EST, close of market. After that, you get tomorrow's price.

For at least VTIAX, you can follow the ETF version to have a close estimate of what the end-of-day price will be. You'll want to compare that price to the to the previous day's end-of-day NAV. The price that your cost-basis "loss" shows for your account is computed from that previous day's NAV. Note that the VTIAX admiral share price is different from the ETF price (today, this is something like $25/share vs $40/share), so a conversion is necessary if you want to get precise values. But all I want to know is whether my loss evaporated over the day, or has become substantially less worthwhile.

So in my example above, the $x,500 loss was shown (all day long, Monday!) as computed from Friday's NAV. The end-of-Monday NAV, which was the value used when the 3pm order was executed, put the loss at $x,300, which I would have seen if I had watched the ETF price over the day on Monday.

[livesoft]

Related to this thread are these other threads on documenting wash sales:
One from randomizer: viewtopic.php?p=2760472#p2760472 (shows Average Cost method)
and another one from boglehat: viewtopic.php?f=2&t=182354

Both have screen captures which show how Vanguard's documentation of wash sales can be confusing to clients. I link them here so folks can find them easily.

[livesoft]

Late Jan 2016 update with tax form information

I will show what happens if I disregard the effect of the transaction in my spouse's IRA. That is, I will present the results of the wash sales in the taxable account as I have shown already in this thread. Later I will make adjustments for the extra issue of the re-invested dividends in VTIAX in my spouse's IRA.

OK, I know the answer that I expect to see: A short-term capital gain of $499.45.

I used HRBlock tax software and imported the 1099-DIV and 1099-B from Vanguard. Here is picture of the Form 8849 with the information:


All I need to know that things worked are the numbers in column (h): -5 + 505 = 500 which is within round-off-to-dollars the correct result.

(HRBlock rounds off all amounts to the nearest dollar. From past experience with TT, TT does something similar and the IRS may send a request for another $1 in taxes that one owes if the software does the round-off incorrectly.)

Below is the VTIAX part of the 1099-B from Vanguard:



Note that the 1099-B has nothing for "Date acquired (Box 1b)" even though Vanguard knows the dates acquired. I don't know how/why the HRBlock tax software chose to put "various" for the date acquired, but that is correct. Short-term vs long-term comes from the 1099-B Box 2 that these transactions are short term.

Bottom line: Importing Vanguard 1099-B that has a wash sale into HRBlock tax software works fine.

[Kevin M]

Very nice contribution to Bogleheads.

Kevin

[livesoft]

I had some time this morning to work on the adjustment necessary by the purchase of shares of VTIAX in my spouse's IRA through automated dividend reinvestment. For the purposes of this thread, let's assume the number of shares of VTIAX purchased in the IRA was 2.641 shares.

I have calculated the disallowed loss from that purchase of 2.641 shares in the IRA. Does anybody want to give a number before I explain it? All information to do the calculation is shown in this thread and specifically in the screen capture in this post.

[livesoft]

Our task is to calculate the dollar amount of the disallowed loss of 2.641 shares.

We can look at how the previous losses were disallowed by the automatic reinvestment of dividends within the same account. Here is an annotated screen capture:



We can see that the 11/03/2015 lot has a partially disallowed loss. All the lots BEFORE that time have had all their losses disallowed and added to the basis of another lot that is not shown.

How many shares of the 11/03/2015 lot have already had losses disallowed? There are a couple of ways to determine this. One way is to recall that 14.066 shares were purchased causing a wash sale and simply to count up how those shares were apportioned by Vanguard. The count shows that 1.806 shares of the 11/03/2015 lot were used.
(1.806 sh / 1.958 sh) x $3.30 = $3.04 which is the amount Vanguard has for the disallowed loss.
1.958 sh - 1.806 sh = 0.152 sh which is the number of remaining shares of the 11/03/2015 lot to work with.

Another way is to see that $3.04 of the $3.30 loss was disallowed, so $0.26 of the loss remains. The math is
$0.26 / $3.30 x 1.958 shares = 0.154 sh which suffers from round-off error. I am going to use 0.152 sh.

So with 2.641 shares needed, we have
0.152 sh from the 11/03 lot with loss of $0.26 = ($3.30 - $3.04)
2.012 sh from the 11/17 lot with loss of $2.02
0.477 sh from the 12/01 lot with loss of $0.66 = (0.477 / 1.981) * $2.75
2.641 sh total from the 3 lots with loss of $2.94 = (0.26 + 2.02 + 0.66)

So we have to disallow a further $2.94 in losses. This simply will increase the short-term capital gain reported by Vanguard on the 1099-B. I will show how to make this adjustment in my next post.

[Traveller]

Hey Livesoft,

Thank you for doing this. I thought I had a handle on TLHing, but his thread has further helped educate me. I appreciate you taking the time to walk through all the nitty-gritty for all to see! Cheers

[livesoft]

OK, from the previous screen capture of the Form 8849 I think it is pretty clear that for the second sale of VTIAX listed I need to put a "W" and a "3" in columns f and g. Or maybe I need a "W" and a "-3". I know that column h has to have that "505" changed to a "508". I suppose I could instead change the first sale, but I don't think the IRS will even care. OTOH, the 14.066 shares of the first sale have already had all their losses disallowed, so I'm comfortable doing this with the 2nd sale since the disallowed losses are coming from 2.641 shares of the 998.536 shares of that 2nd sale.

Now all I have to do is use my tax software to get it to do what I want.

[livesoft]

I wanted to show a few more things about the Vanguard bookkeeping. If I go to the web site and look at "Cost basis summary" and the "Realized gains & losses" tab for the VTIAX investment, I can see that there were 6 adjustments made. I have marked them as A, B, C, D, E, F in the screen capture below which is a similar copy to a previous screen capture. I have marked each adjustment with the number of the affected shares.



Now I will show some of the transactions in the same display that follow the ones just displayed with annotation A, B, C, D, E, F as well.



In the 2nd figure, we see the Sell transactions of the shares that have had adjustments (loss disallowed). I'd like to point out that Sell transaction F is for 1.806 shares which confirms the number of shares from the 11/03/2015 lot (call it lot F if you like) that I wrote about previously.

These transactions suggest that there might be other ways I could have selected the 2.641 shares and arrived at a different dollar amount than $2.94, but by doing so, then I would have had to have Vanguard change its numbers shown in the transactions just displayed. Messy!

[livesoft]

And to make things messier:

If I had not sold ALL the shares of VTIAX at the end of last year, then the bookkeeping of the wash sales would not have ended. If instead, I made more purchases and sales, then the Vanguard accounting of the process would never again agree with any of my bookkeeping. And how would I remember what went on if I made some sell transactions more than few months in the future? It seems true that I would only need to know about only the few lots that were affected (say the 11/03, 11/17, and part of the 12/01 lots).

That suggests that one might wish to sell those 2.641 shares separately before making a big sale of other shares the next day. Or better yet, do not automatically reinvest distributions in a taxable account.

Moral of story: Well, you can figure this out for yourself.

[livesoft]

So here is the change in the tax software needed. I used HRBlock, but other software is similar. I just went to imported the 1099-B and changed Box 1f for the last sale reported (only sell transactions are reported on 1099-B) to a "W" with the option menu and put 2.94 in the Box 1g which was rounded to a "3":



The resulting bit of Form 8949 now looks like and shows "508" where it used to show "505":



I am not certain if I should have perhaps changed the previous transaction instead by increasing the "10" in Box 1f to "13" and left the second transaction alone. I don't care because it would not materially change my tax return at all.

[livesoft]

A couple of more thoughts:

First, I want to re-iterate that I gave several ways to avoid the wash sale to be caused by the automatic reinvesting of the distribution in my spouse's IRA in this post: viewtopic.php?p=2723770#p2723770 I would definitely encourage folks to avoid that hassle after I went through it.

Second, I'll make a comment about the 1099-B from Vanguard: It noted the wash sale and adjustments properly in the situation shown in this thread. But what if one sold at a loss in late December 2015 and then created a wash sale by buying the shares back within 30 days in early January 2016? Would the 2015 1099-B from Vanguard (or any broker) have had the disallowed loss shown and a "W" in column 1f from actions that happened in 2016?

Maybe someone can report on that.

[livesoft]

One more thing I need to do to finish this up: I need to take into account that I sold shares that paid me a dividend before I had held those shares 61 days. Thus, those shares did not meet the personal holding period for the qualified part of the dividend paid by them to remain qualified to me. I already noted this in a previous post here: viewtopic.php?p=2728272#p2728272

The dividend in question is the one used to purchase additional shares on 12/18/2015. Vanguard.com has the distribution as $0.189 per share. The percentage of the dividend that is labeled qualified is 69.36% according to this page at Vanguard. which is consistent with the 1099-DIV that I received from Vanguard. This is a percentage for the entire year of distributions and not just for the December distribution, but it is all that Vanguard provides. Some other investments (notably ETFs) will do a breakdown for each separate dividend paid throughout the year.

The number of shares that were not held long enough are those purchased on 12/15/2015 as noted in this post: viewtopic.php?p=2721237#p2721237 So that's 2.077 shares.

Those 2.077 share paid
2.077 sh * $0.189 per share = $0.3926 in the December distribution. The amount of QDI would be 0.6936 * $0.3926 = $0.27.

So I need to REDUCE the amount of qualified dividend income by 27 cents in the 1099-DIV Box 1b from Vanguard. I do this after importing the 1099-DIV into my tax software. Because the tax software rounds to the nearest dollar, this does not change my taxes at all.

[crit]

I know there have been several comments and questions about whether there is a conflict with 401k/IRA accounts, over several threads. I would like to add this one data point:

Our taxable is at Vanguard in a joint account. I also have an old 403b that is held at Vanguard*. I whoops-ed a purchase of VTSAX last fall, 28 days after harvesting losses of VTSAX in taxable. It was not marked or notified as a wash sale.

I really appreciate all of the diligence here, but my take-home message from this thread is that I WILL avoid wash sales.

*I'll admit to being a bit confused about this account. It shows up on my main Vanguard account page as its own subaccount. But when I click into it, it opens a different interface that is branded with the higher-ed institution the 403b came from. So it's not clear to me how close the link is with Vanguard, and whether that minor distance caused them to miss the wash sale, or whether it's truly their interpretation of wash sale rules.

[Doc]

Our taxable is at Vanguard in a joint account. I also have an old 403b that is held at Vanguard*. I whoops-ed a purchase of VTSAX last fall, 28 days after harvesting losses of VTSAX in taxable. It was not marked or notified as a wash sale.

Wouldn't expect to be. The regs call for reporting for the same cusip in the same account. Brokers are not going out of their way to do something that the will PO their clients and the Guv doesn't require anyway.

Second, I'll make a comment about the 1099-B from Vanguard: It noted the wash sale and adjustments properly in the situation shown in this thread. But what if one sold at a loss in late December 2015 and then created a wash sale by buying the shares back within 30 days in early January 2016? Would the 2015 1099-B from Vanguard (or any broker) have had the disallowed loss shown and a "W" in column 1f from actions that happened in 2016?

Yes they will/might. A few years ago Vg changed the ABP for the 1099-INT from that reported on their year end statements. Schwab routinely "corrects" after year end info on their 1099 composite and actually has a chart showing what and how the corrections were made. Good double entry bookkeeping and all not like Vanguard's simple "W" or "adjusted".

[retiredjg]

I know there have been several comments and questions about whether there is a conflict with 401k/IRA accounts, over several threads.

Something else to keep in mind is that we know that IRA accounts, both yours and your spouses, count when considering wash sales. I don't remember if it was a court case or a private ruling or what, but IRAs were specifically included. That part is clear.

401k/403b/etc. were not included - they were just not mentioned at all IIRC. People have varying opinions about what that means. Some people think that means that they are not included in wash sale considerations and some think they are in a grey area and prefer not to be found on the wrong side of the invisible line inside the grey area.

[Kevin M]

I don't remember if it was a court case or a private ruling or what, but IRAs were specifically included. That part is clear.

One place it's clear is in IRS Pub 550:

Wash Sales

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 someone just follows guidance in the IRS pubs, which is as much as most taxpayers will do (and most won't even read the pubs), one does not have to worry about transactions in 401k or 403b accounts with respect to wash sales. I wouldn't, but I no longer have a 401k or 403b.

Kevin

[retiredjg]

One place it's clear is in IRS Pub 550:

I'm curious. Do you (or anybody) know if that has been there for a long time? Or might it have appeared in the last year or two (or three?) when the ruling occurred?

Just the way that is written makes me think that 401k/403b are definitely NOT involved as far as they are concerned (or intend to pursue).

[jayhawkerbeef]

^also interested as I've read, even mentioned in posts on this site, of being careful to not trigger a wash sale when investing in the same holdings in taxable and 401k.

[livesoft]

One place it's clear is in IRS Pub 550:

I'm curious. Do you (or anybody) know if that has been there for a long time? Or might it have appeared in the last year or two (or three?) when the ruling occurred?

Here is the 2008 Publication 550 where the IRA wash sale thing is first found: https://www.irs.gov/pub/irs-prior/p550--2008.pdf

The ruling is from 2008: https://www.irs.gov/pub/irs-drop/rr-08-05.pdf Web searches show discussions in 2007 that this ruling is going to appear.

[retiredjg]

Thanks. For reasons unknown, I thought it was much more recent. Seems pretty clear to me.

[retiredjg]

^also interested as I've read, even mentioned in posts on this site, of being careful to not trigger a wash sale when investing in the same holdings in taxable and 401k.

I know that one of the larger robos, Wealthfront or Betterment but not sure which, specifically mentions 401k/etc. plans...apparently out of an over-abundance of caution.

Maybe that is what stirred up this confusion. Maybe it had been clear for years and they interjected doubt which got magnified through such postings as you mentioned.

[jayhawkerbeef]

Thanks. For reasons unknown, I thought it was much more recent. Seems pretty clear to me.

Agree. Seems clear. This is timely as I'm running out of room for international in the 401k and will be investing in it (different share class) in my taxable. Peace of mind not having to worry about the wash sale. Especially since I have no control of reinvesting dividends/gains in the 401k.

[Doc]

At least one firm thinks that 401k's are a consideration as well as IRA's.

Current Employer 401k: If your current employer’s 401k plan has investments tracking the same index, only purchases (not sales) of additional shares of those investments could result in wash sales in your Betterment account.

http://support.betterment.com/customer/ ... -accounts-

[Kevin M]

One place it's clear is in IRS Pub 550:

I'm curious. Do you (or anybody) know if that has been there for a long time? Or might it have appeared in the last year or two (or three?) when the ruling occurred?

Already answered, but I'll just chime in that I actually did what currently would be considered a wash sale due to the IRA ruling the year before the ruling (as I recall). I also specifically remember, about that time, hearing a guest on a finance talk show mentioning that the IRA thing was a workaround to the wash sale issue. The guest was from one of the tax prep book publication companies (Lasser's IIRC).

Kevin