Tax Loss Harvesting: Dividend date matter?

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Jack FFR1846
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Tax Loss Harvesting: Dividend date matter?

Post by Jack FFR1846 »

I'm overly cautious, I guess, but want to be sure.

I have a dividend from an ETF I want to sell to tax loss. VTI. Dividend was 12/31. Can I sell at a loss or is that dividend considered a "sale"? I took the cash from the dividend and moved it out. I am of course concerned with the 30 day window that can create a wash.

Thanks for the clarification.
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mary1492
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Re: Tax Loss Harvesting: Dividend date matter?

Post by mary1492 »

xyzzy
Last edited by mary1492 on Sat Oct 01, 2022 7:10 am, edited 1 time in total.
Topic Author
Jack FFR1846
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Re: Tax Loss Harvesting: Dividend date matter?

Post by Jack FFR1846 »

I'm concerned with the timing. Google searches warn about dividend re-investment, which I am NOT doing. When the dividend posts, I take the cash out of the account.
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anon_investor
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Re: Tax Loss Harvesting: Dividend date matter?

Post by anon_investor »

Jack FFR1846 wrote: Wed Jan 26, 2022 11:30 am I'm concerned with the timing. Google searches warn about dividend re-investment, which I am NOT doing. When the dividend posts, I take the cash out of the account.
The dividend payment doesn't cause any issues, it is the reinvestment that can.
MrJedi
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Re: Tax Loss Harvesting: Dividend date matter?

Post by MrJedi »

Something tangentially related: if these are short term shares you may consider want to consider the qualified status of the dividends and the 60 day hold required to qualify.

I agree with others for wash sale, only the reinvestment (purchase) would have any potential impact. If you do not reinvest, there are no replacement shares.
livesoft
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Re: Tax Loss Harvesting: Dividend date matter?

Post by livesoft »

For a qualified dividend to remain qualified to the investor, the SHARES that the dividend stems from must've been held for at least 61 days. Clearly, one of those days is the Record Date otherwise the shareholder would not have received the dividend for shares NOT held on that date. The 61 days could be ANY of those 61 days that include the record date, so 60 days before or 60 days after or 29 days before and 31 days after, etc. See IRS Publication 550 about this where the ex-dividend date is mentioned. It is generally easier to track the ex-dividend date than the record date. The date 12/31/2021 is not involved in VTI dividend at all, so that must be a typo by the OP.
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Re: Tax Loss Harvesting: Dividend date matter?

Post by H-Town »

livesoft wrote: Wed Jan 26, 2022 6:40 pm For a qualified dividend to remain qualified to the investor, the SHARES that the dividend stems from must've been held for at least 61 days. Clearly, one of those days is the Record Date otherwise the shareholder would not have received the dividend for shares NOT held on that date. The 61 days could be ANY of those 61 days that include the record date, so 60 days before or 60 days after or 29 days before and 31 days after, etc. See IRS Publication 550 about this where the ex-dividend date is mentioned. It is generally easier to track the ex-dividend date than the record date. The date 12/31/2021 is not involved in VTI dividend at all, so that must be a typo by the OP.
Supposed a taxpayer already filed 2021 return using Vanguard 1099 (it's already available on Vanguard). And supposed that taxpayer filed qualified dividends as stated on the 1099.

Supposed he does a TLH transaction on 1/27 that would make the qualified dividends to become nonqualified dividend, how does he handle it? Supersede the 2021 return and claim a different amount than Vanguard's 1099?
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Re: Tax Loss Harvesting: Dividend date matter?

Post by MrJedi »

H-Town wrote: Wed Jan 26, 2022 6:53 pm
livesoft wrote: Wed Jan 26, 2022 6:40 pm For a qualified dividend to remain qualified to the investor, the SHARES that the dividend stems from must've been held for at least 61 days. Clearly, one of those days is the Record Date otherwise the shareholder would not have received the dividend for shares NOT held on that date. The 61 days could be ANY of those 61 days that include the record date, so 60 days before or 60 days after or 29 days before and 31 days after, etc. See IRS Publication 550 about this where the ex-dividend date is mentioned. It is generally easier to track the ex-dividend date than the record date. The date 12/31/2021 is not involved in VTI dividend at all, so that must be a typo by the OP.
Supposed a taxpayer already filed 2021 return using Vanguard 1099 (it's already available on Vanguard). And supposed that taxpayer filed qualified dividends as stated on the 1099.

Supposed he does a TLH transaction on 1/27 that would make the qualified dividends to become nonqualified dividend, how does he handle it? Supersede the 2021 return and claim a different amount than Vanguard's 1099?
1040 instructions say that your 1099-DIV qualified dividends are no longer qualified if not held long enough. So you must report this properly and take them out of your qualified dividends total.
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Re: Tax Loss Harvesting: Dividend date matter?

Post by grabiner »

H-Town wrote: Wed Jan 26, 2022 6:53 pm Supposed a taxpayer already filed 2021 return using Vanguard 1099 (it's already available on Vanguard). And supposed that taxpayer filed qualified dividends as stated on the 1099.

Supposed he does a TLH transaction on 1/27 that would make the qualified dividends to become nonqualified dividend, how does he handle it? Supersede the 2021 return and claim a different amount than Vanguard's 1099?
This is one of many things that you can do which will change your tax situation in the previous year. If you do any of these things and have already filed, you must file an amended return.

Other common examples are contributing to a deductible IRA or HSA, or recharacterizing a contribution from deductible IRA to Roth IRA or vice versa.
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