I had been wheeling SPY for past few years (intention of holding term) and last few months I got assigned twice. They have gotten -5k in recent drop. I would want to do some tax harvesting (I am at 35% federal bracket and in CA), and swap them to VTI to hold long term. Few questions
1) does swapping them with VTI trigger any wash sale?
2) Since some of the SPY were purchased within 30 days, they would trigger wash sales. But if i sell them all (all at loss), do i need to worry about adjustments since the cost basis and loss would be correct regardless? What makes thing difficult are they are spread across two brokerage.
3) I have a sold put open for SPY for next month as well, i understand selling the stocks would trigger wash sale to the option. Do i have to close the put before buying VTI? or can i just wait till it expires and then adjust the cost basis based on the stock loss? How does it work if the stock loss are more than the option premium?
Sorry for the convoluted questions!
how to avoid wash sale
Re: how to avoid wash sale
1) SPY follows the S&P 500 index and VTI follows the CRSP US Total Market Index, which I would not consider to be substantially identical, so I would be comfortable tax loss harvesting between these two ETFs. I would not be comfortable tax loss harvesting between SPY and VOO, both of which follow the S&P 500 index, although some people would on the argument that they're managed by different companies and have different expense ratios.
2) Arguably you would create a wash sale and should make adjustments since you can't sell at exactly the same time across two brokerages, but in practice the total loss will be the same either way, so I'm not sure i'd worry about it. Even if the IRS ever said you're wrong their couldn't be any penalties since the net effect on your taxes would be the same either way. Someone else might have different thoughts.
3) I don't know anything about options.
2) Arguably you would create a wash sale and should make adjustments since you can't sell at exactly the same time across two brokerages, but in practice the total loss will be the same either way, so I'm not sure i'd worry about it. Even if the IRS ever said you're wrong their couldn't be any penalties since the net effect on your taxes would be the same either way. Someone else might have different thoughts.
3) I don't know anything about options.
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Re: how to avoid wash sale
Thank you for the reply! I guess just don't adjust cost basis and just report all the loss? Even if IRS check it, the number will end up the same as long as I close all position within same calendar year. Is that correct?
Re: how to avoid wash sale
Yes, that matches my understanding. If it were me I'd probably only do it that way if it was just a matter of minutes as I switched between brokerages, but technically I think it would all net out the same as long as all the sales happened within the same year.