Wash sale/TLH question [Tax Loss Harvesting]
Wash sale/TLH question [Tax Loss Harvesting]
Hi folks. Hopefully a quick and easy question. I'm considering doing some tax loss harvesting of IXUS in my taxable account. My last IXUS purchase was on 1/5/22.
Do I need to wait until 2/7 (the first trading day after 31 days) to sell any IXUS shares, to avoid a wash sale?
I believe that is the case, but I hope someone can confirm.
Do I need to wait until 2/7 (the first trading day after 31 days) to sell any IXUS shares, to avoid a wash sale?
I believe that is the case, but I hope someone can confirm.
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Re: Wash sale/TLH question
Yes, you understand it correctly.
Re: Wash sale/TLH question
No. You can sell shares that have a loss at any time after you purchase them.
A wash sale is created when you have bought other shares and still hold them within the wash sale period. (And of course you sold some shares at a loss.) So for a wash sale to have occurred you have to have 2 separate sets of shares including one set sold for a loss.
The answer is NO wash sale given the information you have presented and you don't have to wait to sell shares with losses.
A wash sale is created when you have bought other shares and still hold them within the wash sale period. (And of course you sold some shares at a loss.) So for a wash sale to have occurred you have to have 2 separate sets of shares including one set sold for a loss.
The answer is NO wash sale given the information you have presented and you don't have to wait to sell shares with losses.
Re: Wash sale/TLH question
To clarify, these are all my purchases within the last 30 days. All have losses:livesoft wrote: ↑Fri Jan 21, 2022 4:56 am No. You can sell shares that have a loss at any time after you purchase them.
A wash sale is created when you have bought other shares and still hold them within the wash sale period. (And of course you sold some shares at a loss.) So for a wash sale to have occurred you have to have 2 separate sets of shares including one set sold for a loss.
The answer is NO wash sale given the information you have presented and you don't have to wait to sell shares with losses.
01/05/2022 - 1 share
01/04/2022 - 4 shares
01/03/2022 - 27 shares
Do I understand correctly -- if I only sold one or two of these lots, it would be a wash sale? But if I sell all three lots at the same time, it wouldn't be a wash sale?
Re: Wash sale/TLH question
Yes, you understand correctly, but note my edit.
Some folks might say you have an irrelevant wash sale.
Re: Wash sale/TLH question
Yes! And the basic reason is that the wash sale is supposed to prevent an investor from creating a loss only on paper, but then staying invested. When you sell all shares purchased in the wash sale period (in one transaction), the loss is real and you haven't stayed invested.buyer wrote: ↑Fri Jan 21, 2022 5:20 amTo clarify, these are all my purchases within the last 30 days. All have losses:livesoft wrote: ↑Fri Jan 21, 2022 4:56 am No. You can sell shares that have a loss at any time after you purchase them.
A wash sale is created when you have bought other shares and still hold them within the wash sale period. (And of course you sold some shares at a loss.) So for a wash sale to have occurred you have to have 2 separate sets of shares including one set sold for a loss.
The answer is NO wash sale given the information you have presented and you don't have to wait to sell shares with losses.
01/05/2022 - 1 share
01/04/2022 - 4 shares
01/03/2022 - 27 shares
Do I understand correctly -- if I only sold one or two of these lots, it would be a wash sale? But if I sell all three lots at the same time, it wouldn't be a wash sale?
An excellent explanation is available here: Wash Sales and Replacement Stock
The first five of the short articles here are all excellent, and provide an outstanding overview of wash sales: The Wash Sale Rule
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: Wash sale/TLH question
More to the point, some brokers might *treat* it that way (as if the sale were not executed in a single transaction).
"Discipline matters more than allocation.” |—| "In finance, if you’re certain of anything, you’re out of your mind." ─William Bernstein
Re: Wash sale/TLH question
Wait, hold on! So, I didn't say that the three lots I bought in the last 30 days comprise all my holdings of IXUS. I also have tons of other lots going all the way back to February 2020, many which are still in the green.
So, if I do not intend to sell out my entire IXUS stake at once, then I do need to wait until 2/7 to sell any shares with losses... right? Sorry, I didn't mean to be unclear.
So, if I do not intend to sell out my entire IXUS stake at once, then I do need to wait until 2/7 to sell any shares with losses... right? Sorry, I didn't mean to be unclear.
Re: Wash sale/TLH question
No, you do not have to sell all your older shares. Shares purchased outside the wash sale period(s) can be ignored in the calculus. You may sell them if you want to.buyer wrote: ↑Fri Jan 21, 2022 6:10 am Wait, hold on! So, I didn't say that the three lots I bought in the last 30 days comprise all my holdings of IXUS. I also have tons of other lots going all the way back to February 2020, many which are still in the green.
So, if I do not intend to sell out my entire IXUS stake at once, then I do need to wait until 2/7 to sell any shares with losses... right? Sorry, I didn't mean to be unclear.
Re: Wash sale/TLH question
Agree, but I'd do it anyways if I had a slight preference to hold VXUS instead of IXUS for the long term (which I do).
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Re: Wash sale/TLH question
Do you have a TLH threshold? Personally I don't even think about TLH until I start to get to around $1k of losses to harvest.
Re: Wash sale/TLH question
My preference is to harvest big and rarely. I don't enjoy the process and rue owning partner funds which complicate simplicity.anon_investor wrote: ↑Fri Jan 21, 2022 9:15 amDo you have a TLH threshold? Personally I don't even think about TLH until I start to get to around $1k of losses to harvest.
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Re: Wash sale/TLH question
Spring 2020 was a such a unique event, I am glad I can live with the TLH partner because the market recovered so sharply I will likely own those March 2020 TLH partner purchased shares for the rest of my life. But it was worth it, I harvested a 5 figure amount.goingup wrote: ↑Fri Jan 21, 2022 9:41 amMy preference is to harvest big and rarely. I don't enjoy the process and rue owning partner funds which complicate simplicity.anon_investor wrote: ↑Fri Jan 21, 2022 9:15 amDo you have a TLH threshold? Personally I don't even think about TLH until I start to get to around $1k of losses to harvest.
Re: Wash sale/TLH question
I think that's key. You have to be willing to hold the partner fund forever. In March 2020 I swapped all our VTIAX for VFWAX and harvested $25K in losses. I'm fine holding either of those International funds, but prefer not to hold both so it worked out well. For me, it's too early to start harvesting.anon_investor wrote: ↑Fri Jan 21, 2022 10:13 amSpring 2020 was a such a unique event, I am glad I can live with the TLH partner because the market recovered so sharply I will likely own those March 2020 TLH partner purchased shares for the rest of my life. But it was worth it, I harvested a 5 figure amount.goingup wrote: ↑Fri Jan 21, 2022 9:41 amMy preference is to harvest big and rarely. I don't enjoy the process and rue owning partner funds which complicate simplicity.anon_investor wrote: ↑Fri Jan 21, 2022 9:15 amDo you have a TLH threshold? Personally I don't even think about TLH until I start to get to around $1k of losses to harvest.
Re: Wash sale/TLH question
Thanks for the confirmation.
When I checked yesterday about half of my IXUS lots were negative, totaling around -$800. Looks like it will be down even more today.
And yes, exactly, I'd like to switch to VXUS. I would feel more comfortable now owning a Vanguard fund instead of BlackRock.
Thank you so much everyone!
Re: Wash sale/TLH question
The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
Re: Wash sale/TLH question
Hm. Then maybe I should hold off on doing this for now? I'd certainly hate to miss out on taking the losses.Lee_WSP wrote: ↑Fri Jan 21, 2022 12:41 pm The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
Re: Wash sale/TLH question
Given how easy it is to simply wait it out, it's quite frankly just not worth poking th the bear IMO. Regardless of whether they're likely to even bother trying to enforce the rule.buyer wrote: ↑Fri Jan 21, 2022 1:21 pmHm. Then maybe I should hold off on doing this for now? I'd certainly hate to miss out on taking the losses.Lee_WSP wrote: ↑Fri Jan 21, 2022 12:41 pm The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
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Re: Wash sale/TLH question
If the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:25 pmGiven how easy it is to simply wait it out, it's quite frankly just not worth poking th the bear IMO. Regardless of whether they're likely to even bother trying to enforce the rule.buyer wrote: ↑Fri Jan 21, 2022 1:21 pmHm. Then maybe I should hold off on doing this for now? I'd certainly hate to miss out on taking the losses.Lee_WSP wrote: ↑Fri Jan 21, 2022 12:41 pm The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
Re: Wash sale/TLH question
Not correct. The rule still washes shares bought but sold. The service has not applied the section d step up to sold shares.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pmIf the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:25 pmGiven how easy it is to simply wait it out, it's quite frankly just not worth poking th the bear IMO. Regardless of whether they're likely to even bother trying to enforce the rule.buyer wrote: ↑Fri Jan 21, 2022 1:21 pmHm. Then maybe I should hold off on doing this for now? I'd certainly hate to miss out on taking the losses.Lee_WSP wrote: ↑Fri Jan 21, 2022 12:41 pm The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
Re: Wash sale/TLH question
If I create a wash sale, then I am not concerned about it. That is, I have absolutely no wash sale concern if I create a wash sale. That's mostly because wash sales are not illegal and I have no problems reporting wash sales on my tax return. Also most of my wash sales are inconsequential and done with my eyes wide open.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:33 pmNot correct.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pm ...
If the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.
Re: Wash sale/TLH question
The rule still washes shares bought but sold. The service has not applied the section d step up to sold shares.livesoft wrote: ↑Fri Jan 21, 2022 1:34 pmIf I create a wash sale, then I am not concerned about it. That is, I have absolutely no wash sale concern if I create a wash sale. That's mostly because wash sales are not illegal and I have no problems reporting wash sales on my tax return. Also most of my wash sales are inconsequential and done with my eyes wide open.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:33 pmNot correct.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pm ...
If the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.
There is no authority stating any such thing as inconsequential wash sale other than the same lot cannot wash itself.
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Re: Wash sale/TLH question
Yes there may be technically a wash sale, but that doesn't matter, you take the net loss, regardless of which cashes you want to apply the loss to. So if you have 100 shares of IXUS and the entire position has a net $100 loss, if you sell the ENTIRE position, you will book the $100 loss. It doesn't matter that some of those shares have been purchased within the last 30 days. You still get to keep the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:33 pmNot correct. The rule still washes shares bought but sold. The service has not applied the section d step up to sold shares.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pmIf the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:25 pmGiven how easy it is to simply wait it out, it's quite frankly just not worth poking th the bear IMO. Regardless of whether they're likely to even bother trying to enforce the rule.buyer wrote: ↑Fri Jan 21, 2022 1:21 pmHm. Then maybe I should hold off on doing this for now? I'd certainly hate to miss out on taking the losses.Lee_WSP wrote: ↑Fri Jan 21, 2022 12:41 pm The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
Re: Wash sale/TLH question
Section d is where you get to claim it. However, in rulings on the prior statute, the section d adjustment is not applied to shares sold.anon_investor wrote: ↑Fri Jan 21, 2022 1:38 pmYes there may be technically a wash sale, but that doesn't matter, you take the net loss, regardless of which cashes you want to apply the loss to. So if you have 100 shares of IXUS and the entire position has a net $100 loss, if you sell the ENTIRE position, you will book the $100 loss. It doesn't matter that some of those shares have been purchased within the last 30 days. You still get to keep the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:33 pmNot correct. The rule still washes shares bought but sold. The service has not applied the section d step up to sold shares.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pmIf the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.
I think both positions are defensible, but given the risk, it's not worth it.
Re: Wash sale/TLH question
Lee_WSP has been spamming all wash sale threads with constantly changing assertions. I don't know whether you should continue to engage him.anon_investor wrote: ↑Fri Jan 21, 2022 1:38 pmYes there may be technically a wash sale, but that doesn't matter, you take the net loss, regardless of which cashes you want to apply the loss to. So if you have 100 shares of IXUS and the entire position has a net $100 loss, if you sell the ENTIRE position, you will book the $100 loss. It doesn't matter that some of those shares have been purchased within the last 30 days. You still get to keep the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:33 pmNot correct. The rule still washes shares bought but sold. The service has not applied the section d step up to sold shares.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pmIf the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.buyer wrote: ↑Fri Jan 21, 2022 1:21 pmHm. Then maybe I should hold off on doing this for now? I'd certainly hate to miss out on taking the losses.Lee_WSP wrote: ↑Fri Jan 21, 2022 12:41 pm The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
The latest that no loss can be claimed in these examples is the farthest out there and absolutely no one else would concur.
Can we get a mod in here to start erasing his misinformation?
Re: Wash sale/TLH question
"inconsequential" is not the same as "non-reportable."
Suppose I had a permanently disallowed loss of $1 created by an automated dividend reinvestment in my IRA after I sold shares for a loss in my taxable account. Would that $1 disallowed loss be inconsequential? Would it change my income taxes by very much? What if the $1 number was $2 or $5 or $10? Would those be inconsequential? Would the wash sale that created such disallowed losses be inconsequential even though the disallowed loss would be reported on a Form 1040?
Re: Wash sale/TLH question
I suggest you read the rulings before claiming to be an expert on this issue. Unlike you and everyone else, I actually cite them.gobel wrote: ↑Fri Jan 21, 2022 2:38 pmLee_WSP has been spamming all wash sale threads with constantly changing assertions. I don't know whether you should continue to engage him.anon_investor wrote: ↑Fri Jan 21, 2022 1:38 pmYes there may be technically a wash sale, but that doesn't matter, you take the net loss, regardless of which cashes you want to apply the loss to. So if you have 100 shares of IXUS and the entire position has a net $100 loss, if you sell the ENTIRE position, you will book the $100 loss. It doesn't matter that some of those shares have been purchased within the last 30 days. You still get to keep the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:33 pmNot correct. The rule still washes shares bought but sold. The service has not applied the section d step up to sold shares.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pmIf the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.
The latest that no loss can be claimed in these examples is the farthest out there and absolutely no one else would concur.
Can we get a mod in here to start erasing his misinformation?
In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.Other aspects of the wash sale rules are more mechanical in nature. Thus, if a taxpayer sells multiple blocks of stock or securities and, within the wash sale period, purchases a number of replacement shares equal to the number contained within a block, the loss disallowed is the earliest sustained Reg. Sec. 1.1091-1(b). If such an identification cannot be readily made, the loss affected by Sec. 1091 is the loss associated with the block acquired earliest.
Sec. 1091 eschews netting. Accordingly, if a gain block and a loss block are sold, and a prohibited reacquisition occurs, the gain is fully recognized and the loss is disallowed (Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
Re: Wash sale/TLH question
You're misinterpreting the quote. It's saying that you have to treat lots separately, even when sold together for an overall gain. If one lot has a loss and one has a gain, and then you rebuy the shares, you have a wash sale on the one lot. And when it says "the loss is disallowed" it means that a wash sale has occurred and you adjust the basis of the new shares. It does not mean you lose the loss forever.Lee_WSP wrote: ↑Fri Jan 21, 2022 3:10 pm I suggest you read the rulings before claiming to be an expert on this issue. Unlike you and everyone else, I actually cite them.
In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.Other aspects of the wash sale rules are more mechanical in nature. Thus, if a taxpayer sells multiple blocks of stock or securities and, within the wash sale period, purchases a number of replacement shares equal to the number contained within a block, the loss disallowed is the earliest sustained Reg. Sec. 1.1091-1(b). If such an identification cannot be readily made, the loss affected by Sec. 1091 is the loss associated with the block acquired earliest.
Sec. 1091 eschews netting. Accordingly, if a gain block and a loss block are sold, and a prohibited reacquisition occurs, the gain is fully recognized and the loss is disallowed (Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
btw I think you're the only one claiming expertise around here viewtopic.php?f=1&t=368048&p=6456973&hi ... e#p6456973
Re: Wash sale/TLH question
You have to read each ruling. The way the service applies the rule when they lump the sales together as a step transaction is to disallow the loss, disallow any offsets of gains, and not adjust the basis of sold shares.gobel wrote: ↑Fri Jan 21, 2022 3:42 pmYou're misinterpreting the quote. It's saying that you have to treat lots separately, even when sold together for an overall gain. If one lot has a loss and one has a gain, and then you rebuy the shares, you have a wash sale on the one lot. And when it says "the loss is disallowed" it means that a wash sale has occurred and you adjust the basis of the new shares. It does not mean you lose the loss forever.Lee_WSP wrote: ↑Fri Jan 21, 2022 3:10 pm I suggest you read the rulings before claiming to be an expert on this issue. Unlike you and everyone else, I actually cite them.
In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.Other aspects of the wash sale rules are more mechanical in nature. Thus, if a taxpayer sells multiple blocks of stock or securities and, within the wash sale period, purchases a number of replacement shares equal to the number contained within a block, the loss disallowed is the earliest sustained Reg. Sec. 1.1091-1(b). If such an identification cannot be readily made, the loss affected by Sec. 1091 is the loss associated with the block acquired earliest.
Sec. 1091 eschews netting. Accordingly, if a gain block and a loss block are sold, and a prohibited reacquisition occurs, the gain is fully recognized and the loss is disallowed (Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
btw I think you're the only one claiming expertise around here viewtopic.php?f=1&t=368048&p=6456973&hi ... e#p6456973
Here's another that deals with actual stocks. However, the replacement shares were purchased after the sale and the ruling does not mention section D.
https://www.taxnotes.com/research/feder ... 31/d6kz?h=*
To be clear, I'm not certain what the current position of the service is. But to err on the side of caution, we should not assume we get to adjust the basis of the sold shares which trigger the wash sale.
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Re: Wash sale/TLH question
Even if this is correct, it seems like this is easily avoided by selling the lots separately, from newest to oldest (within the wash sale window). Thus, the disallowed loss always moves to shares that have yet to be sold. The reporting may be complicated, but you'll get the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 3:10 pm In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.
Re: Wash sale/TLH question
I thought so at first, but they apply the step transaction doctrine to lump them all together.AnEngineer wrote: ↑Fri Jan 21, 2022 4:20 pmEven if this is correct, it seems like this is easily avoided by selling the lots separately, from newest to oldest (within the wash sale window). Thus, the disallowed loss always moves to shares that have yet to be sold. The reporting may be complicated, but you'll get the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 3:10 pm In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.
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Re: Wash sale/TLH question
What's the ruling on point? The one I see you reference, RR 70-231 seems irrelevant here (though does cover wash sales across year boundaries that came up in a previous thread).Lee_WSP wrote: ↑Fri Jan 21, 2022 4:27 pmI thought so at first, but they apply the step transaction doctrine to lump them all together.AnEngineer wrote: ↑Fri Jan 21, 2022 4:20 pmEven if this is correct, it seems like this is easily avoided by selling the lots separately, from newest to oldest (within the wash sale window). Thus, the disallowed loss always moves to shares that have yet to be sold. The reporting may be complicated, but you'll get the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 3:10 pm In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.
Re: Wash sale/TLH question
You don’t really need a ruling to see that the step transaction doctrine applies, they apply it liberally, but in these rulings, they apply it.AnEngineer wrote: ↑Fri Jan 21, 2022 4:35 pmWhat's the ruling on point? The one I see you reference, RR 70-231 seems irrelevant here (though does cover wash sales across year boundaries that came up in a previous thread).Lee_WSP wrote: ↑Fri Jan 21, 2022 4:27 pmI thought so at first, but they apply the step transaction doctrine to lump them all together.AnEngineer wrote: ↑Fri Jan 21, 2022 4:20 pmEven if this is correct, it seems like this is easily avoided by selling the lots separately, from newest to oldest (within the wash sale window). Thus, the disallowed loss always moves to shares that have yet to be sold. The reporting may be complicated, but you'll get the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 3:10 pm In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.
Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
Re: Wash sale/TLH question
This is incorrect.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:33 pmNot correct. The rule still washes shares bought but sold. The service has not applied the section d step up to sold shares.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pmIf the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.Lee_WSP wrote: ↑Fri Jan 21, 2022 1:25 pmGiven how easy it is to simply wait it out, it's quite frankly just not worth poking th the bear IMO. Regardless of whether they're likely to even bother trying to enforce the rule.buyer wrote: ↑Fri Jan 21, 2022 1:21 pmHm. Then maybe I should hold off on doing this for now? I'd certainly hate to miss out on taking the losses.Lee_WSP wrote: ↑Fri Jan 21, 2022 12:41 pm The services current position based on prior rulings is that they will apply the step transaction doctrine, view the entire sixty one day period as a single transaction, disallow the losses and not adjust the basis of shares disposed of.
Pay attention to where Fairmark says the service disagrees with his interpretation if you want to use it as a source. It is not a great source.
Go read Pubs 550, page 56.
Wash Sales
You cannot deduct losses from sales or trades
of stock or securities in a wash sale unless the
loss was incurred in the ordinary course of your
business as a dealer in stock or securities.
A wash sale occurs when you sell or trade
stock or securities at a loss and within 30 days
before or after the sale you:
1. Buy substantially identical stock or securities,
2. Acquire substantially identical stock or securities in a fully taxable trade,
3. Acquire a contract or option to buy substantially identical stock or securities, or
4. Acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.
If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.
If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities includes the holding period of the stock or securities sold.
Time is the ultimate currency.
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Re: Wash sale/TLH question
I'm fine the step transaction doctrine part, I was more asking on what says that the loss is disallowed by no basis is readjusted if the shares are sold together.Lee_WSP wrote: ↑Fri Jan 21, 2022 4:48 pmYou don’t really need a ruling to see that the step transaction doctrine applies, they apply it liberally, but in these rulings, they apply it.AnEngineer wrote: ↑Fri Jan 21, 2022 4:35 pmWhat's the ruling on point? The one I see you reference, RR 70-231 seems irrelevant here (though does cover wash sales across year boundaries that came up in a previous thread).Lee_WSP wrote: ↑Fri Jan 21, 2022 4:27 pmI thought so at first, but they apply the step transaction doctrine to lump them all together.AnEngineer wrote: ↑Fri Jan 21, 2022 4:20 pmEven if this is correct, it seems like this is easily avoided by selling the lots separately, from newest to oldest (within the wash sale window). Thus, the disallowed loss always moves to shares that have yet to be sold. The reporting may be complicated, but you'll get the loss.Lee_WSP wrote: ↑Fri Jan 21, 2022 3:10 pm In each of these rulings, the loss is disallowed, the losses do not offset the gains, the basis is not adjusted retroactively. The plain reading of the section d of the statute would lead one to assume that the basis of previously sold shares should be adjusted, but it is not addressed in the statute or the regs. As applied in previous rulings, they do not adjust the basis of previously sold substantially identical properties.
Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
Re: Wash sale/TLH question
Pub 550 is still worth more than my 2 cents to provide guidance for taxpayers.
Personally, if I generated a wash sale, I just increase the basis of replacement shares (which then sold). Wash sale defers the loss until all replacement shares are sold.
Easy peasy. I'll be very happy if the IRS come at me. Then I'll have a story to tell this forum.
I'm not sure why you bring up step transaction doctrine as a mechanism for the IRS to disallow a loss if all shares were sold. If you look at substance over form doctrine, most would agree that you can take the loss if all replacement shares were sold.
Time is the ultimate currency.
Re: Wash sale/TLH question
https://www.taxnotes.com/research/feder ... 1-316/d87xAnEngineer wrote: ↑Fri Jan 21, 2022 5:06 pmI'm fine the step transaction doctrine part, I was more asking on what says that the loss is disallowed by no basis is readjusted if the shares are sold together.Lee_WSP wrote: ↑Fri Jan 21, 2022 4:48 pmYou don’t really need a ruling to see that the step transaction doctrine applies, they apply it liberally, but in these rulings, they apply it.AnEngineer wrote: ↑Fri Jan 21, 2022 4:35 pmWhat's the ruling on point? The one I see you reference, RR 70-231 seems irrelevant here (though does cover wash sales across year boundaries that came up in a previous thread).Lee_WSP wrote: ↑Fri Jan 21, 2022 4:27 pmI thought so at first, but they apply the step transaction doctrine to lump them all together.AnEngineer wrote: ↑Fri Jan 21, 2022 4:20 pm
Even if this is correct, it seems like this is easily avoided by selling the lots separately, from newest to oldest (within the wash sale window). Thus, the disallowed loss always moves to shares that have yet to be sold. The reporting may be complicated, but you'll get the loss.
Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
Rev rul 71-316 is the most on point. You'd assume that the 506 ruling would save the sale, but they disallow the loss and it does not look like they adjusted the basis.
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Re: Wash sale/TLH question
I have to say I'm a little shamed to admit how entertaining I find this discussion. I'm all for hearing the contrarian point of view on how to interpret something that's intentionally left vague. But even in saying that I'm still having a hard time understanding why revenue rulings with very specific arguments would somehow lead a "reasonable" court to essentially throw out everything besides Section 1091(a).Lee_WSP wrote: ↑Fri Jan 21, 2022 5:35 pmhttps://www.taxnotes.com/research/feder ... 1-316/d87xAnEngineer wrote: ↑Fri Jan 21, 2022 5:06 pmI'm fine the step transaction doctrine part, I was more asking on what says that the loss is disallowed by no basis is readjusted if the shares are sold together.Lee_WSP wrote: ↑Fri Jan 21, 2022 4:48 pmYou don’t really need a ruling to see that the step transaction doctrine applies, they apply it liberally, but in these rulings, they apply it.AnEngineer wrote: ↑Fri Jan 21, 2022 4:35 pmWhat's the ruling on point? The one I see you reference, RR 70-231 seems irrelevant here (though does cover wash sales across year boundaries that came up in a previous thread).
Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
Rev rul 71-316 is the most on point. You'd assume that the 506 ruling would save the sale, but they disallow the loss and it does not look like they adjusted the basis.
For instance Rev. Rul. 71-316 linked above very specifically ruled that securities bought on margin are held to section 1091(a) of the Code, not that application of U.S. Code § 1091 stops at (a). Yes the loss is disallowed and is added to the basis of the other lot that caused the wash sale in the first place per application of Section 1091(d) - as you said a specific lot cannot be a wash sale onto itself. Subsequently, even milliseconds later, that other lot is sold at the higher basis which effectively recognizes the originally disallowed loss.
The argument seems to be that the IRS will both look at the sale of lots separately when it comes to determining the disallowed loss, but will somehow also argue the sale of all lots happened simultaneously such that you can't actually match the lots together to adjust the basis per either section 1091(b) or section 1091(c). Those two ideas can't logically exist together.
Re: Wash sale/TLH question
lol because literally no one except Lee_WSP seems to be misunderstanding this. 26 U.S. Code § 1091(a) deals with disallowing a loss on the original sale, while 1091(d) deals with where that loss gets moved to. 1091(d) does not just disappear because a RR is dealing with/clarifying an issue with 1091(a).robbierob03 wrote: ↑Fri Jan 21, 2022 6:17 pmI have to say I'm a little shamed to admit how entertaining I find this discussion. I'm all for hearing the contrarian point of view on how to interpret something that's intentionally left vague. But even in saying that I'm still having a hard time understanding why revenue rulings with very specific arguments would somehow lead a "reasonable" court to essentially throw out everything besides Section 1091(a).Lee_WSP wrote: ↑Fri Jan 21, 2022 5:35 pmhttps://www.taxnotes.com/research/feder ... 1-316/d87xAnEngineer wrote: ↑Fri Jan 21, 2022 5:06 pmI'm fine the step transaction doctrine part, I was more asking on what says that the loss is disallowed by no basis is readjusted if the shares are sold together.Lee_WSP wrote: ↑Fri Jan 21, 2022 4:48 pmYou don’t really need a ruling to see that the step transaction doctrine applies, they apply it liberally, but in these rulings, they apply it.AnEngineer wrote: ↑Fri Jan 21, 2022 4:35 pm
What's the ruling on point? The one I see you reference, RR 70-231 seems irrelevant here (though does cover wash sales across year boundaries that came up in a previous thread).
Rev. Rul. 70-231). As is the case in Sec. 356(c) or Sec. 1491, the wash sale rules bifurcate a plan or arrangement and surgically ferrets out losses for disallowances (Rev. Ruls. 68-23 and 71-433).
Rev rul 71-316 is the most on point. You'd assume that the 506 ruling would save the sale, but they disallow the loss and it does not look like they adjusted the basis.
For instance Rev. Rul. 71-316 linked above very specifically ruled that securities bought on margin are held to section 1091(a) of the Code, not that application of U.S. Code § 1091 stops at (a). Yes the loss is disallowed and is added to the basis of the other lot that caused the wash sale in the first place per application of Section 1091(d) - as you said a specific lot cannot be a wash sale onto itself. Subsequently, even milliseconds later, that other lot is sold at the higher basis which effectively recognizes the originally disallowed loss.
The argument seems to be that the IRS will both look at the sale of lots separately when it comes to determining the disallowed loss, but will somehow also argue the sale of all lots happened simultaneously such that you can't actually match the lots together to adjust the basis per either section 1091(b) or section 1091(c). Those two ideas can't logically exist together.
Re: Wash sale/TLH question
I’m saying we don’t have guidance on how basis adjustments are handled when the shares which triggered the sale are already sold.robbierob03 wrote: ↑Fri Jan 21, 2022 6:17 pm I have to say I'm a little shamed to admit how entertaining I find this discussion. I'm all for hearing the contrarian point of view on how to interpret something that's intentionally left vague.
Separately, they apply the step transaction doctrine to a series of buy/sells so you can’t just “wash the wash”.
In the case of a bona fide liquidation of all shares for 31 days, I think they just don’t care and will not challenge it. But they are not going to go so far as to say it’s okay.
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Re: Wash sale/TLH question
Why do the normal rules not apply? That is, why are sold shares separate? I checked out RR 71-316 and it also looked irrelevant here.Lee_WSP wrote: ↑Fri Jan 21, 2022 6:54 pmI’m saying we don’t have guidance on how basis adjustments are handled when the shares which triggered the sale are already sold.robbierob03 wrote: ↑Fri Jan 21, 2022 6:17 pm I have to say I'm a little shamed to admit how entertaining I find this discussion. I'm all for hearing the contrarian point of view on how to interpret something that's intentionally left vague.
Re: Wash sale/TLH question
There is this scenario where you can buy a few lots and then sell most or all of them within sixty one days.AnEngineer wrote: ↑Fri Jan 21, 2022 7:24 pmWhy do the normal rules not apply? That is, why are sold shares separate? I checked out RR 71-316 and it also looked irrelevant here.Lee_WSP wrote: ↑Fri Jan 21, 2022 6:54 pmI’m saying we don’t have guidance on how basis adjustments are handled when the shares which triggered the sale are already sold.robbierob03 wrote: ↑Fri Jan 21, 2022 6:17 pm I have to say I'm a little shamed to admit how entertaining I find this discussion. I'm all for hearing the contrarian point of view on how to interpret something that's intentionally left vague.
They cause the wash by virtue of a) but it creates this odd situation of having shares no longer owned causing the wash.
Let's say you own 100 shares from over 30 days ago, you then purchase 100 more, then sell them, and then a day later sell the rest of the shares. All for a loss.
By virtue of section a) the loss is disallowed. There is no guidance whether the basis of the either lot is adjusted. It seems unjust if it isn't, but we have no ruling blessing this.
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Re: Wash sale/TLH question
The wash sale loss disallowed is clear, that's just the basic rule. Why do you even think the basis might not be adjusted?Lee_WSP wrote: ↑Fri Jan 21, 2022 8:02 pmThere is this scenario where you can buy a few lots and then sell most or all of them within sixty one days.AnEngineer wrote: ↑Fri Jan 21, 2022 7:24 pmWhy do the normal rules not apply? That is, why are sold shares separate? I checked out RR 71-316 and it also looked irrelevant here.Lee_WSP wrote: ↑Fri Jan 21, 2022 6:54 pmI’m saying we don’t have guidance on how basis adjustments are handled when the shares which triggered the sale are already sold.robbierob03 wrote: ↑Fri Jan 21, 2022 6:17 pm I have to say I'm a little shamed to admit how entertaining I find this discussion. I'm all for hearing the contrarian point of view on how to interpret something that's intentionally left vague.
They cause the wash by virtue of a) but it creates this odd situation of having shares no longer owned causing the wash.
Let's say you own 100 shares from over 30 days ago, you then purchase 100 more, then sell them, and then a day later sell the rest of the shares. All for a loss.
By virtue of section a) the loss is disallowed. There is no guidance whether the basis of the either lot is adjusted. It seems unjust if it isn't, but we have no ruling blessing this.
Re: Wash sale/TLH question
I recall reading a ruling or case where someone bought and sold a bunch of bonds or something. The service ended up disallowing the loss, and not allowing the taxpayer to offset the gains. Unfortunately I cannot find it again. Now, it could be because there were enough shares still held that the basis adjustment of the shares still held was sufficient to offset the disallowance and they simply did not address the basis adjustment. But if there were not enough shares to offset the shares disallowed, then that would suggest the basis is not adjusted for sold shares.AnEngineer wrote: ↑Fri Jan 21, 2022 8:09 pmThe wash sale loss disallowed is clear, that's just the basic rule. Why do you even think the basis might not be adjusted?Lee_WSP wrote: ↑Fri Jan 21, 2022 8:02 pmThere is this scenario where you can buy a few lots and then sell most or all of them within sixty one days.AnEngineer wrote: ↑Fri Jan 21, 2022 7:24 pmWhy do the normal rules not apply? That is, why are sold shares separate? I checked out RR 71-316 and it also looked irrelevant here.Lee_WSP wrote: ↑Fri Jan 21, 2022 6:54 pmI’m saying we don’t have guidance on how basis adjustments are handled when the shares which triggered the sale are already sold.robbierob03 wrote: ↑Fri Jan 21, 2022 6:17 pm I have to say I'm a little shamed to admit how entertaining I find this discussion. I'm all for hearing the contrarian point of view on how to interpret something that's intentionally left vague.
They cause the wash by virtue of a) but it creates this odd situation of having shares no longer owned causing the wash.
Let's say you own 100 shares from over 30 days ago, you then purchase 100 more, then sell them, and then a day later sell the rest of the shares. All for a loss.
By virtue of section a) the loss is disallowed. There is no guidance whether the basis of the either lot is adjusted. It seems unjust if it isn't, but we have no ruling blessing this.
(in every ruling I've reread today, there are more than enough shares still held to offset the disallowance, so there is no need to address the basis adjustment).
That said, since I cannot find it, my memory could just be off.
Although there is a circuit Court case where two people entered into a swap contract of sorts. The loss was disallowed and no basis was adjusted, but they leaned more on the sham transaction theory.
There's also the elephant in the room question of "if the loss was simply deferred, why do they bother contesting the disallowance?"
Re: Wash sale/TLH question
Heehee... so much for an easy question! Now I don't know what to think. I guess I'll just sit tight, wait until the 31 day mark to be extra safe, and meanwhile consider whether this is even worth doing.
I was not planning to sell my entire IXUS position (yet), only the lots with losses. That's about half my position as of the current dip.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pm If the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.
That dividend payment hit my account on 1/5. The 1 share I bought on the same date was me manually reinvesting it. (I have automatic reinvesting turned off.)
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Re: Wash sale/TLH question
You don't have to sell the entire position, just any shares purchased within the last 30 days.buyer wrote: ↑Sat Jan 22, 2022 5:01 am Heehee... so much for an easy question! Now I don't know what to think. I guess I'll just sit tight, wait until the 31 day mark to be extra safe, and meanwhile consider whether this is even worth doing.
I was not planning to sell my entire IXUS position (yet), only the lots with losses. That's about half my position as of the current dip.anon_investor wrote: ↑Fri Jan 21, 2022 1:31 pm If the OP is selling the entire IXUS position (and has not made any purchases anywhere lese) and does not plan to buy anymore IXUS for 31 days, then there is no wash sale concern.
That dividend payment hit my account on 1/5. The 1 share I bought on the same date was me manually reinvesting it. (I have automatic reinvesting turned off.)
Re: Wash sale/TLH question
I agree. If those 3 lots are all you have purchased in the last 30 days, then by selling all three you avoid a consequential wash sale. There might be an irrelevant wash sale, depending on how your brokerage handles things, but you will be able to claim the full loss.anon_investor wrote: ↑Sat Jan 22, 2022 5:56 am You don't have to sell the entire position, just any shares purchased within the last 30 days.
If the brokerage is a stickler and uses FIFO, they would sell the 1/3 lot with 5 shares washed (but the loss on 22 shares would be realized). The 1/4 and 1/5 lots would have their basis adjusted, preserving your loss. A microsecond later the 1/4 shares are sold with 1 share washed (the now increased loss due to the basis adjustment on 3 shares is realized). A microsecond later the 1/5 share is sold with the increased loss due to the basis adjustment realized. And you have now realized all your losses.
Or the brokerage could disregard the irrelevant wash sales because you submitted everything in one sell order and just realize all your losses in one fell swoop.
Last edited by rkhusky on Sat Jan 22, 2022 6:57 am, edited 1 time in total.