TLH Partner for Vanguard Tax-Managed Small Cap

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Topic Author
KingRiggs
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TLH Partner for Vanguard Tax-Managed Small Cap

Post by KingRiggs » Fri Jan 11, 2019 6:20 pm

I have a position in VTSMX (Vanguard Tax-managed Small-Cap Fund) where I had a capital loss of about $1,500. Held in taxable brokerage account. I'm interested in my first TLH. What would be a suitable Vanguard fund to "partner" with that fund to get sort of the same exposure, but avoid a wash sale? I was thinking VSMAX (Small-Cap Index Admiral Shares). It is an index fund as opposed to the tax-managed fund, so I would think that would satisfy the requirement that they not be substantially identical.

Or should I look to something that is more clearly not related to the Tax-managed Small-Cap fund like the Extended Market Index Admiral Shares (VEXAX) that has more of a mid-cap tilt?

Any input is appreciated!

rkhusky
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by rkhusky » Fri Jan 11, 2019 6:26 pm

Either is fine.

BTW the ticker is VTMSX and VSMAX has 2x the number of stocks, in addition to the different strategy, so quite a bit different.
Last edited by rkhusky on Fri Jan 11, 2019 6:33 pm, edited 1 time in total.

Northern Flicker
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by Northern Flicker » Fri Jan 11, 2019 6:29 pm

IJR would be fine as well and closer to VTMSX and more tax-efficient if the market rallies and you end up holding it long-term. There are enough differences between IJR and VTMSX that they are not substantially identical.
Last edited by Northern Flicker on Fri Jan 11, 2019 8:11 pm, edited 1 time in total.
Taking a break from Bogleheads.

Topic Author
KingRiggs
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Location: Indiana

Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by KingRiggs » Fri Jan 11, 2019 6:42 pm

Another question, as I'm still a bit fuzzy on the wash sale rule.

I know I can't purchase more shares of the Tax-managed small-cap fund (VTMSX) for 30 days after the sale. I'm unclear about transactions BEFORE the sale. I have two lots of shares:

8/16/2018 $10,000 purchase -$1500 loss
1/3/2019 $5,000 purchase $411 gain

Does that 1/3/19 purchase of shares keep me from doing a TLH on the 8/16/18 lot?

livesoft
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by livesoft » Fri Jan 11, 2019 6:45 pm

The 1/3/2019 does not keep you from doing a TLH, but does create a partial wash sale if you sell the 8/16/2018 lot at a loss before 31 days from 1/3/2019. Whether the partial wash sale is of any lasting consequence will depend on whether the 1/3/2019 purchase was in an IRA or the like.
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Topic Author
KingRiggs
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by KingRiggs » Fri Jan 11, 2019 6:49 pm

Both lots are held in the same taxable brokerage account. I’ll have to do a little research on partial wash sales now, unless someone wants to give me the two-second version...

stocknoob4111
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by stocknoob4111 » Fri Jan 11, 2019 7:14 pm

$5000 is a wash sale so half of it

Topic Author
KingRiggs
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Location: Indiana

Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by KingRiggs » Fri Jan 11, 2019 7:31 pm

stocknoob4111 wrote:
Fri Jan 11, 2019 7:14 pm
$5000 is a wash sale so half of it
So the portion of the loss disallowed is a ratio of the cost bases of the lots, and not the number of shares transacted, if I’m understanding correctly?

livesoft
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by livesoft » Fri Jan 11, 2019 7:49 pm

KingRiggs wrote:
Fri Jan 11, 2019 7:31 pm
So the portion of the loss disallowed is a ratio of the cost bases of the lots, and not the number of shares transacted, if I’m understanding correctly?
Nope, that not right, so i think you are not understanding correctly.
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stocknoob4111
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by stocknoob4111 » Fri Jan 11, 2019 8:02 pm

per my understanding, it's the ratio of # of shares you purchased that caused the wash sale to the # of shares you TLH'd multiplied by the loss amount.

So if you TLH'd 100 shares for a loss of $1000 and then repurchased 75 shares with the wash sale window then $750 is disallowed (i.e. 75/100 * $1000). In your post the # of shares is missing, it lists only an amount. Someone can correct me if I am wrong :)

Topic Author
KingRiggs
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by KingRiggs » Fri Jan 11, 2019 8:04 pm

I could alternatively sell both the older lot AND the lot purchased within the last 30 days and avoid the issue of a wash sale altogether, correct?

livesoft
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by livesoft » Fri Jan 11, 2019 8:17 pm

What's wrong with creating a wash sale anyways?
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Topic Author
KingRiggs
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by KingRiggs » Fri Jan 11, 2019 8:22 pm

livesoft wrote:
Fri Jan 11, 2019 8:17 pm
What's wrong with creating a wash sale anyways?
Nothing wrong with it, but it diminishes the amount of my TLH, and adds to the basis of my remaining shares. Kinda defeats the purpose.

I appreciate the folks who have taken the time to post informative comments!

livesoft
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by livesoft » Fri Jan 11, 2019 9:11 pm

KingRiggs wrote:
Fri Jan 11, 2019 8:22 pm
Nothing wrong with it, but it diminishes the amount of my TLH, and adds to the basis of my remaining shares. Kinda defeats the purpose.
By the same token, so would selling the recently purchased shares.
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stocknoob4111
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Re: TLH Partner for Vanguard Tax-Managed Small Cap

Post by stocknoob4111 » Fri Jan 11, 2019 9:15 pm

KingRiggs wrote:
Fri Jan 11, 2019 8:22 pm
Nothing wrong with it, but it diminishes the amount of my TLH, and adds to the basis of my remaining shares. Kinda defeats the purpose.
upping the basis of your existing shares is a good thing not bad, you will pay less tax in the end if you have a higher basis when you sell.. so your loss deduction is preserved, it's just deferred to the future.

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