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clear up a little confusion on wash sales please
Old 06-08-2011, 02:59 PM   #1
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clear up a little confusion on wash sales please

Can someone on here confirm that I have this correct?

I buy 100 shares of ABC corp. today in my IRA for $10 a share.
The next day ABC corp. falls to $9 a share.
I buy 100 shares of ABC corp. in my taxable account for $9 a share.
ABC corp drops to $8 a share and stays there.

If I wait 31 days before selling ABC stock at a loss in the taxable account, the wash sale rule is not triggered, correct? If I were to sell my taxable account position before 31 days, the loss would get absorbed forever into my IRA position (but not increase it's basis).

So I can buy similar stocks in my IRA and taxable accounts, but should always keep an eye on when I sell the stock in taxable such that it has been 31 days since I bought the same stock in my IRA? I can sell the stock in the IRA at any time though, because the basis would not be transfered out into the taxable account?

I really don't understand why they have to make this so convoluted...
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Old 06-09-2011, 12:15 PM   #2
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Yes that sounds about right, though my tax knowledge is fading as I distance myself from April 15th. They want to screw you with the IRA buy. Your IRA basis is sort of increased, it's just that no one cares about it.

Replacement shares are selected chronologically, earliest purchases get the added basis before later share purchases, so I don't think there is a way to re-buy the wash sale shares and fix the problem.

They're just trying to get your taxes as soon as possible.
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Old 06-09-2011, 01:07 PM   #3
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Sounds right to me. Messing this up could lose you a capitol loss...
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Old 06-09-2011, 02:35 PM   #4
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On a related issue, here's a tip I learned from this forum:

Don't have dividends or gains reinvested in your taxable account. If you do, then a sale from that account may trigger the wash sale rule, causing extra paperwork at tax time.
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Old 06-09-2011, 02:44 PM   #5
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Originally Posted by TromboneAl View Post
On a related issue, here's a tip I learned from this forum:

Don't have dividends or gains reinvested in your taxable account. If you do, then a sale from that account may trigger the wash sale rule, causing extra paperwork at tax time.

Or you could (at least prior to this year) ignore the small amount of 'wash' that might occur... I had a few that were in the single digit $s.... but took the whole loss anyhow...


Now that everything is going to be reported.... I do not think it is an option anymore....
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