Embarrassing wash sale violation...

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8hygro
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Joined: Sun Dec 25, 2016 9:15 am

Embarrassing wash sale violation...

Post by 8hygro » Thu Mar 26, 2020 1:36 pm

In haste yesterday, and attempting to offset some capital gains while also freeing up some funds to rebalance, I was flagged with the violation. I sold one specific lot of IVV shares (for a specific amount of loss) and hit sold, in my taxable account. In seconds, I completed an unrelated Index fund purchase. This morning I notice the account flagged. The lot of IVV shares I sold, was only 28 days old. There is also another lot of IVV shares purchased the same day (28 days ago) that is now flagged with an adjusted cost basis. Can this be fixed, to allow the original desired capital gains offset, by simply waiting another day and exchanging the now flagged lot of IVV shares into say ITOT?

TIA

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iceport
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Re: Embarrassing wash sale violation...

Post by iceport » Thu Mar 26, 2020 1:39 pm

8hygro wrote:
Thu Mar 26, 2020 1:36 pm
In haste yesterday, and attempting to offset some capital gains while also freeing up some funds to rebalance, I was flagged with the violation. I sold one specific lot of IVV shares (for a specific amount of loss) and hit sold, in my taxable account. In seconds, I completed an unrelated Index fund purchase. This morning I notice the account flagged. The lot of IVV shares I sold, was only 28 days old. There is also another lot of IVV shares purchased the same day (28 days ago) that is now flagged with an adjusted cost basis. Can this be fixed, to allow the original desired capital gains offset, by simply waiting another day and exchanging the now flagged lot of IVV shares into say ITOT?

TIA
Yes, you can fix it by selling the other recent purchase with the adjusted cost basis. And you don't even have to wait! (I guess I'm assuming those shares have losses, also...)
"Discipline matters more than allocation.” ─William Bernstein

Topic Author
8hygro
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Re: Embarrassing wash sale violation...

Post by 8hygro » Thu Mar 26, 2020 1:48 pm

iceport, yes they have losses.

If I am not tax loss harvesting pur se, could I just repurchase another S&P500 fund like VOO?
Last edited by 8hygro on Thu Mar 26, 2020 1:50 pm, edited 2 times in total.

livesoft
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Re: Embarrassing wash sale violation...

Post by livesoft » Thu Mar 26, 2020 1:49 pm

Not embarassing and I would not use the word "violation" with "wash sale" since it is not illegal to have a wash sale and the consequences are usually easily fixed as you have just learned. But there was this by Yours Truly:
I go senile, day trade on margin, wash sale, and...
Wiki This signature message sponsored by sscritic: Learn to fish.

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iceport
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Re: Embarrassing wash sale violation...

Post by iceport » Thu Mar 26, 2020 1:54 pm

8hygro wrote:
Thu Mar 26, 2020 1:48 pm
If I am not tax loss harvesting pur se, could I just repurchase another S&P500 fund like VOO?
Well, I suppose you could. But why not just buy ITOT?

Even if it wasn't your primary intent, why not gladly take advantage of a harvested loss? Purchasing another S&P 500 index fund arguably creates a wash sale that would disallow you from claiming the loss. (Not everyone agrees, but this is the consensus view.) Your broker would not flag the purchase of VOO as a wash sale, but their rules for reporting wash sales are different than yours.
"Discipline matters more than allocation.” ─William Bernstein

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8hygro
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Re: Embarrassing wash sale violation...

Post by 8hygro » Thu Mar 26, 2020 1:58 pm

Ah, I see. Then if I really wanted to be back in an S&P500 position, after 30 days I could just repurchase back into IVV. Is that how I understand it?

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iceport
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Re: Embarrassing wash sale violation...

Post by iceport » Thu Mar 26, 2020 2:13 pm

8hygro wrote:
Thu Mar 26, 2020 1:58 pm
Ah, I see. Then if I really wanted to be back in an S&P500 position, after 30 days I could just repurchase back into IVV. Is that how I understand it?
Yes, you certainly could. The only hitch is that if that if the "round trip" results in realizing capital gains, those will wipe out the corresponding amount of harvested losses. So using a substitute fund that you'll be satisfied to own for the long haul is always best. (Or, if you're "lucky," your substitute fund will have lost value, and you can harvest another loss.)

You have options, and I'm not trying to steer your choices, just inform...
"Discipline matters more than allocation.” ─William Bernstein

Topic Author
8hygro
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Re: Embarrassing wash sale violation...

Post by 8hygro » Thu Mar 26, 2020 2:44 pm

Thank you iceport and livesoft.

Reading about doing things and actually doing things are completely different things. Things definitely make more sense after actually performing this seemingly simple action. Thanks for the patience!

MotoTrojan
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Re: Embarrassing wash sale violation...

Post by MotoTrojan » Thu Mar 26, 2020 2:47 pm

8hygro wrote:
Thu Mar 26, 2020 1:58 pm
Ah, I see. Then if I really wanted to be back in an S&P500 position, after 30 days I could just repurchase back into IVV. Is that how I understand it?
In general it is recommended you do not tax-loss harvest into funds you aren't comfortable holding forever, as you might end up doing so.

Another option if you have bonds in your IRA/401k is to sell equity in taxable, leave it in cash for 30 days while moving bonds to equity in IRA/401k, then unwind that position to go back to your desired taxable equity fund. While that ensures you maintain market exposure, capture the loss, and stay in your intended fund long-term, it would not allow you to TLH any additional losses that occur over the 30 days.

Shallowpockets
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Re: Embarrassing wash sale violation...

Post by Shallowpockets » Thu Mar 26, 2020 2:53 pm

Are you sure you got flagged for wash sale? Wash sales are not a violation.
Maybe you got flagged for "freeriding".

Looking at your post you sold and bought in the same day without waiting for the sale to clear T +2 days. Unless the buy money was seperate money and not contingent on the sale of the first lots.

Look up free riding. That's when you use money to buy that you don't actually have for trading based on a sale that has not cleared.

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