is this a correct way to do TLH between taxable and IRA ?

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carminered2019
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is this a correct way to do TLH between taxable and IRA ?

Post by carminered2019 »

is this one of the ways to do a tax loss harvesting ?

IRA>>>>sell XX TBM>>>>buy XX FZROX
Taxable>>>sell XX FSKAX>>>buy XX TBM

wait after 31 days then:
IRA>>>>sell XX FZROX>>>>buy XX TBM
Taxable>>>>sell TBM>>>> buy FSKAX
TropikThunder
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Re: is this a correct way to do TLH between taxable and IRA ?

Post by TropikThunder »

carminered2019 wrote: Wed Jan 19, 2022 11:25 pm is this one of the ways to do a tax loss harvesting ?

IRA>>>>sell XX TBM>>>>buy XX FZROX
Taxable>>>sell XX FSKAX>>>buy XX TBM

wait after 31 days then:
IRA>>>>sell XX FZROX>>>>buy XX TBM
Taxable>>>>sell TBM>>>> buy FSKAX
No.

If your concern is that FZROX and FSKAX are too similar to go directly from one to the other, doing the counter-balanced trade in the IRA won't help. Purchase of a substantially identical security in an IRA will void the loss the same as if you had gone straight from FSKAX to FZROX in taxable in the first place.
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carminered2019
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Re: is this a correct way to do TLH between taxable and IRA ?

Post by carminered2019 »

my concern is I will end up holding FZROX in taxable and FRROX is not portable if I need to move my account to another firm. I did what you suggested in taxable March 2020 low and now stuck with big gain in FZROX.
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iceport
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Re: is this a correct way to do TLH between taxable and IRA ?

Post by iceport »

carminered2019 wrote: Wed Jan 19, 2022 11:55 pm my concern is I will end up holding FZROX in taxable and FRROX is not portable if I need to move my account to another firm. I did what you suggested in taxable March 2020 low and now stuck with big gain in FZROX.
If the goal is to avoid getting stuck in a taxable fund which you'd prefer not to own indefinitely, then the strategy you outlined will work. You just need to be sure the two funds in question are not substantially identical.
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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Lee_WSP
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Re: is this a correct way to do TLH between taxable and IRA ?

Post by Lee_WSP »

So long as fzrox and fskax are not substantially identical. Otherwise step one is a wash.

And you sell TBM for a gain. Otherwise the second step is a wash.
sycamore
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Re: is this a correct way to do TLH between taxable and IRA ?

Post by sycamore »

iceport wrote: Thu Jan 20, 2022 2:15 am
carminered2019 wrote: Wed Jan 19, 2022 11:55 pm my concern is I will end up holding FZROX in taxable and FRROX is not portable if I need to move my account to another firm. I did what you suggested in taxable March 2020 low and now stuck with big gain in FZROX.
If the goal is to avoid getting stuck in a taxable fund which you'd prefer not to own indefinitely, then the strategy you outlined will work. You just need to be sure the two funds in question are not substantially identical.
+1

And it sounds like OP prefers mutual funds, so the commonly suggested tax loss harvest partners are FSKAX (Total Stock) and FXAIX (S&P 500).
OP, there are lots more choices if you're willing to use ETFs.
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iceport
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Re: is this a correct way to do TLH between taxable and IRA ?

Post by iceport »

sycamore wrote: Thu Jan 20, 2022 7:19 am OP, there are lots more choices if you're willing to use ETFs.
True, but then the "exchange" trading option would not be available. I'm not sure if it's an option for the OP or not, but if it is, it does have advantages for "frictionless" TLH trading.

Lee_WSP wrote: Thu Jan 20, 2022 2:43 am And you sell TBM for a gain. Otherwise the second step is a wash.
This is a good point, lately anyway. Usually, bond funds are relatively sedate compared to equity funds, but that hasn't necessarily been true lately. Bond funds have shown a whole lot more volatility that usual. So it's certainly *possible* that there might be a gain in a TBM fund over 30 days. It's still probably not very likely, or it would be relatively small if there was a capital gain.

But given the recent bond fund volatility, it might worthwhile considering just sitting the 31 days out in cash in the taxable account. The overall equity/fixed income ratio would still be maintained...
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
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