Question about the "Wash Sale Rule"
Here is a question for you tax wizards.
Earlier this year, I took advantage of the lower stock market to make changes to my portfolio. I sold a tax inefficient mutual fund in my taxable account and bought fewer shares of that same fund in my IRA on the same day.
So let's say I sold 500 shares of that fund in my taxable account and bought only 400 shares of that same fund in my IRA. According to Turbotax, I can still claim a partial tax loss as the wash sale rule applies only to the shares I bought back.
Some of the 500 shares had been held for > 1 year, and some for < 1 year. When I do my tax return, I create 2 entries to take that into account. For example:
Short term loss: 200 shares
Long term loss: 300 shares
My question is this: when computing the partial tax loss, should the 400 shares I purchased in my IRA first offset the shares held short term and then the shares held long term or vice versa?
In other words, should I report:
1) 200 short term shares washed out by 200 new shares + 200 long term shares washed out by 200 new shares => I get to deduct the long term loss on the sale of 100 shares.
2) 300 long term shares washed out by 300 new shares + 100 short term shares washed out by 100 new shares => I get to deduct the short term loss on the sale of 100 shares.
3) something different.
42 y/o, married, retirement portfolio = 43 x annual expenses