Selling in Taxable Acct, Purchasing in IRA Acct, WASH sale rule question

[water2357]

If you currently own a particular security in a taxable account, does the sale of that taxable security limit when you can purchase that same security in an IRA account to avoid any impact from WASH sale rules in the taxable account?

E.g. if you own 100 shares of x in taxable acct, sell 50 shares of x in taxable account, when can you purchase 50 shares of x in an IRA account with no impact from WASH sale rules on the taxable acct?

[ResearchMed]

If you currently own a particular security in a taxable account, does the sale of that taxable security limit when you can purchase that same security in an IRA account to avoid any impact from WASH sale rules in the taxable account?

E.g. if you own 100 shares of x in taxable acct, sell 50 shares of x in taxable account, when can you purchase 50 shares of x in an IRA account with no impact from WASH sale rules on the taxable acct?

The "wash sale" is only if you are selling holding A at a *loss*.
Then there are restrictions about buying the same or virtually identical holding within 30 days (before or after) if you want to claim the loss on your taxes.

If you are not selling at a loss, then it doesn't matter what you sell or what you buy in terms of wash sale rules.
It's not clear from what you wrote if you would be selling any of x at a loss.

RM

[exodusNH]

If you currently own a particular security in a taxable account, does the sale of that taxable security limit when you can purchase that same security in an IRA account to avoid any impact from WASH sale rules in the taxable account?

E.g. if you own 100 shares of x in taxable acct, sell 50 shares of x in taxable account, when can you purchase 50 shares of x in an IRA account with no impact from WASH sale rules on the taxable acct?

Fyi, it's "wash". It's not an acronym.

Wash sales only matter if you're trying to claim a taxable loss. If you're trying to claim a loss, then you have to wait for 30 calendar days before and after the date of sale.

You can avoid the problem by buying something similar, e.g. if you have a total stock market in your taxable account, sell that, and buy the S&P 500 in your IRA.

[water2357]

1) Ok, so if you sell at a loss, then no matter in what account you would repurchase the same security (taxable acct or IRA acct) you have to wait the 30 days, correct?

2) If the security being sold is split between pre and post 2012 purchases, if the total sale of both pre and post 2012 shares results in a gain, does it matter for wash sale rules if e.g. the pre 2012 shares produced a gain and the post 2012 shares produced a loss?

[sycamore]

2) If the security being sold is split between pre and post 2012 purchases, if the total sale of both pre and post 2012 shares results in a gain, does it matter for wash sale rules if e.g. the pre 2012 shares produced a gain and the post 2012 shares produced a loss?

As far as wash sale rules go, no, it doesn't matter which shares incurred the loss, be they covered or non-covered.

[AnEngineer]

1) Ok, so if you sell at a loss, then no matter in what account you would repurchase the same security (taxable acct or IRA acct) you have to wait the 30 days, correct?

In order to claim the loss on your taxes, you need to wait 30 days. (Actually 31, the wash sale window is the 61 day period beginning 30 days before the sale and ending 30 days after.) However, nothing prevents you from making the purchases. If you purchase in an IRA the loss is gone forever. If you purchase in a taxable account, the loss adjusts the basis of the new shares.

[increment]

2) If the security being sold is split between pre and post 2012 purchases, if the total sale of both pre and post 2012 shares results in a gain, does it matter for wash sale rules if e.g. the pre 2012 shares produced a gain and the post 2012 shares produced a loss?

It doesn't matter that the net result is a gain. If you have lots on which you would report a loss, the loss associated with those lots is subject to being disallowed via the wash-sale rules.

[exodusNH]

1) Ok, so if you sell at a loss, then no matter in what account you would repurchase the same security (taxable acct or IRA acct) you have to wait the 30 days, correct?

2) If the security being sold is split between pre and post 2012 purchases, if the total sale of both pre and post 2012 shares results in a gain, does it matter for wash sale rules if e.g. the pre 2012 shares produced a gain and the post 2012 shares produced a loss?

You only need to wait if you want to claim the loss. If you repurchase in a taxable account, the loss is deferred until you sell the replacement shares. If the replacement shares are in a tax-advantaged account, you lose the ability to claim the loss.

It's only shares purchased 30 days before and after the day you sell that are covered by the rules, including dividend reinvestments.

Unless you're dealing with individual stocks or specialty funds, it's usually trivial to avoid the wash sale by purchasing a similar fund. Search for "tax loss harvesting partners" to find options.

[water2357]

Thanks for the replies, but I'm still not clear on how the pre and post 2012 shares of the same mutual fund will be handled for a wash sale.

Are the pre 2012 shares considered entirely separate from the post 2012 shares when you sell all the shares you hold of the same mutual fund?

So that, if you have a gain on the pre 2012 shares, a loss on the post 2012 shares with a net gain on the sale of all shares, the wash sale rules would prevent you from taking the loss on the post 2012 shares if you purchase that same mutual fund within the wash sale window of 60(61) days? Is that correct?

[exodusNH]

Thanks for the replies, but I'm still not clear on how the pre and post 2012 shares of the same mutual fund will be handled for a wash sale.

Are the pre 2012 shares considered entirely separate from the post 2012 shares when you sell all the shares you hold of the same mutual fund?

So that, if you have a gain on the pre 2012 shares, a loss on the post 2012 shares with a net gain on the sale of all shares, the wash sale rules would prevent you from taking the loss on the post 2012 shares if you purchase that same mutual fund within the wash sale window of 60(61) days? Is that correct?

If you sell something for a loss, regardless of when you purchased it, if you buy a "substantially identical" product within 30 days after the sale, you cannot claim the loss.

In a taxable account, the loss gets added to the basis of the replacement. When you eventually sell the replacement, you'll have a lower capital gain. However, if the replacement shares were purchased in a tax-advantaged account, the loss disappears because those accounts, effectively, have no basis. The money either comes out without taxes or as ordinary income.

Your pre-2012 shares are effectively one gigantic lot with the average cost as your basis. Post-2012 shares are tracked per purchase (lot).

The easiest thing is either wait the 30 days after the sale or purchase something with similar performance but not the intentionally ambiguous "substantially identical". E.g., VTI and VOO track different indices but perform very close to each other.

[water2357]

Thanks for the more detailed explanation on wash sales.

Ok, for the average cost method for mutual funds, you use the average cost of all shares purchased pre 2012 to determine the gain or loss on those shares. And if those shares combined have a loss, you need to be aware of the impact of any purchase within the 61 day period.

For the post 2012 shares, for the average cost method, do you have to come up with more than an average cost for shares purchased within the last 12 months and an average cost for all shares purchased post 2012 but more than 12 months ago, which would be two average cost per share values (a short term value and a long term value for post 2012)?

And how many lots do you need to look at separately for the post 2012 shares sold? Do you use those two average cost values (short and long term) but actually have to calculate a gsin/loss on each different purchase date post 2012 separately and each separate loss would be impacted by the wash sale rules?

If you need a separate cost basis for every purchase post 2012, then that doesn't seem like it would be an average cost basis.

What am I missing on how complicated or easy it is to determine gain/loss on post 2012 shares?