Practical case of Wash Sale rule with Vanguard account

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international001
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Practical case of Wash Sale rule with Vanguard account

Post by international001 » Wed Jan 09, 2019 6:13 pm

So let's all this happens in taxable

1) day 0. I buy 3 shares at $10 each
2) day 60. I buy 1 share at $5
3) day 61. I sell 3 shares of day 0 at $6

So sell is disallowed (Wash sale). If I executed in my Vanguard account, does the 1 share 2 get updated in my Vanguard account? (i.e. with cost basis of $9). And on my 1099-B will I get a loss of only $8

If I do 2 on a Roth Ira on Vanguard account, will I get the same 1099-B? But this time no cost basis modification for 2?

livesoft
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Re: Practical case of Wash Sale rule with Vanguard account

Post by livesoft » Wed Jan 09, 2019 6:23 pm

Which 3 shares did you sell using Specific Identification?
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international001
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Re: Practical case of Wash Sale rule with Vanguard account

Post by international001 » Thu Jan 10, 2019 6:52 am

livesoft wrote:
Wed Jan 09, 2019 6:23 pm
Which 3 shares did you sell using Specific Identification?
' I sell 3 shares of day **0** at $6'

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jhfenton
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Re: Practical case of Wash Sale rule with Vanguard account

Post by jhfenton » Thu Jan 10, 2019 8:43 am

international001 wrote:
Wed Jan 09, 2019 6:13 pm
So let's all this happens in taxable

1) day 0. I buy 3 shares at $10 each
2) day 60. I buy 1 share at $5
3) day 61. I sell 3 shares of day 0 at $6

So sell is disallowed (Wash sale). If I executed in my Vanguard account, does the 1 share 2 get updated in my Vanguard account? (i.e. with cost basis of $9). And on my 1099-B will I get a loss of only $8

If I do 2 on a Roth Ira on Vanguard account, will I get the same 1099-B? But this time no cost basis modification for 2?
international001 wrote:
Thu Jan 10, 2019 6:52 am
' I sell 3 shares of day **0** at $6'
If all transactions are in the same taxable account, you will have a STCL of $8, and the basis on your Day 60 share will be $9 instead of $5. Vanguard will correctly track and report all of it for you.

If Day 60 occurs in an IRA, Vanguard will report a STCL of $12 for your taxable account, and you will have to self-report the wash sale, claiming only $8. You will lose the $4 loss forever.

Brokers do not track and report wash sales across accounts. You have to do that for yourself.

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international001
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Re: Practical case of Wash Sale rule with Vanguard account

Post by international001 » Thu Jan 10, 2019 1:43 pm

Thanks for the confirmation

So they don't do wash sale across accounts even if the same belong to you and are in the same brokerage? And even if they are both taxable?
Imagine 2) happens in another taxable account. You'd have to adjust the cost basis for them, in the case you sell them in 10 years from now. Are you supposed to keep track of that cost basis?

For dividend reinvestments triggering wash sales in the same accounts, it seeems fine to me not to worry much. But then, across accounts, it would seem a nightmare, so we should try to avoid them at all costs.

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jhfenton
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Re: Practical case of Wash Sale rule with Vanguard account

Post by jhfenton » Thu Jan 10, 2019 1:49 pm

international001 wrote:
Thu Jan 10, 2019 1:43 pm
Thanks for the confirmation

So they don't do wash sale across accounts even if the same belong to you and are in the same brokerage? And even if they are both taxable?
Imagine 2) happens in another taxable account. You'd have to adjust the cost basis for them, in the case you sell them in 10 years from now. Are you supposed to keep track of that cost basis?

For dividend reinvestments triggering wash sales in the same accounts, it seeems fine to me not to worry much. But then, across accounts, it would seem a nightmare, so we should try to avoid them at all costs.
Yes to all of that. Beyond wash sales involving the same security in the same account, you are on your own. Brokers aren't required to track and report them across accounts.

We only have one taxable brokerage account, so we would want to avoid them anyway to avoid losing losses entirely, but the record-keeping requirement would be enough reason by itself.

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