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wash sale or hold or ?
Old 12-15-2014, 12:22 PM   #1
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wash sale or hold or ?

Some may know that we (as a couple) do real estate. We rent places out, we lend on property, we carry some contracts on places we've sold. We have not invested much in the stock market. In 2014, after selling all our stock holdings in late 2012 and sitting out the 2013 30% rise, we started buying back in.

Currently hold about 31% VTIAX foreign, 41% VTSAX, and the remainder in VIGAX, VIMAX, and VSGAX, so pretty close to 1/3 foreign and 2/3 domestic index funds.

I read that the 1/3 foreign, 2/3 domestic split is a good thing, but we are going to have a fair amount of taxable income this year and the VTIAX took a beating. So what is a good plan? Do nothing? If I sell the VTIAX and buy a comparable ETF I run afoul of the wash sale rule as it is too similar, right? Sell and sit on the money for 32 days and then re-buy the VTIAX? Exchange the VTIAX for VTSAX and then load up on VTIAX next year till we are back at 33%? (and does that exchange realize the loss for the writeoff?)

I can only write off $3000 against ordinary income, but can write off an unlimited amount against capital gains, right?

This sure is different than "like the house, buy the house - add labor, make money" but I'm getting too old for the add labor part.
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Old 12-15-2014, 12:41 PM   #2
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"Exchange the VTIAX for VTSAX and then load up on VTIAX next year till we are back at 33%? (and does that exchange realize the loss for the writeoff?)"

That is what I was thinking. VTIAX and VTSAX are not similar so it would not be a wash sale. Harvest the loss, then buy VTSAX on the same day. Wait the 32 days and undo.

Don't know if Vanguard has frequent trading restrictions, something to find out.
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Old 12-15-2014, 03:53 PM   #3
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I would sell VTIAX (Vanguard Tot Intl Stock Ix Admiral) and then buy VFWAX (Vanguard FTSE All World ex-US Adm). Both are large cap international funds but are dissimilar enough to avoid a wash sale IMO. I have done this in the past.

You can use the losses against capital gains and to the extent the losses exceed your gains then up to $3k additional which will offset ordinary income.
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Old 12-15-2014, 04:22 PM   #4
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Quote:
Originally Posted by calmloki View Post
Some may know that we (as a couple) do real estate. We rent places out, we lend on property, we carry some contracts on places we've sold. We have not invested much in the stock market. In 2014, after selling all our stock holdings in late 2012 and sitting out the 2013 30% rise, we started buying back in.

Currently hold about 31% VTIAX foreign, 41% VTSAX, and the remainder in VIGAX, VIMAX, and VSGAX, so pretty close to 1/3 foreign and 2/3 domestic index funds.

I read that the 1/3 foreign, 2/3 domestic split is a good thing, but we are going to have a fair amount of taxable income this year and the VTIAX took a beating. So what is a good plan? Do nothing? If I sell the VTIAX and buy a comparable ETF I run afoul of the wash sale rule as it is too similar, right? Sell and sit on the money for 32 days and then re-buy the VTIAX? Exchange the VTIAX for VTSAX and then load up on VTIAX next year till we are back at 33%? (and does that exchange realize the loss for the writeoff?)

I can only write off $3000 against ordinary income, but can write off an unlimited amount against capital gains, right?

This sure is different than "like the house, buy the house - add labor, make money" but I'm getting too old for the add labor part.
Practically speaking, my brokerage told me that they only code a wash sale if the two entities have the same CUSIP. So even if you got a random audit and some Nazi examiner, your likelihood of ever having this looked at is close to nil. If it did get looked at, all these funds are different in some way or another. Even the IRS has better things to do than try to split hairs over a few thousand dollars.

Ha
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Old 12-15-2014, 10:37 PM   #5
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I would sell VTIAX (Vanguard Tot Intl Stock Ix Admiral) and then buy VFWAX (Vanguard FTSE All World ex-US Adm). Both are large cap international funds but are dissimilar enough to avoid a wash sale IMO. I have done this in the past.
I have done this same trade also, for the same reason.
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Old 12-15-2014, 11:07 PM   #6
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Practically speaking, my brokerage told me that they only code a wash sale if the two entities have the same CUSIP. So even if you got a random audit and some Nazi examiner, your likelihood of ever having this looked at is close to nil. If it did get looked at, all these funds are different in some way or another. Even the IRS has better things to do than try to split hairs over a few thousand dollars.

Ha

+1.... not an issue if you buy another fund...
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Old 12-15-2014, 11:54 PM   #7
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I'd read that if the fund's composition and performance was too close it didn't pass IRS muster - I'd considered exchanging from the VTIAX fund to the ETF FTSE but didn't want to have Vanguard label it a wash sale. Looks like the thought is it wouldn't be so labeled, which is great.

Thanks all
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Old 12-16-2014, 12:43 AM   #8
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I'd read that if the fund's composition and performance was too close it didn't pass IRS muster - I'd considered exchanging from the VTIAX fund to the ETF FTSE but didn't want to have Vanguard label it a wash sale. Looks like the thought is it wouldn't be so labeled, which is great.

Thanks all
I am not at all familiar with these securities. Call Vanguard and ask them how they will code it.

Ha
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Old 12-16-2014, 12:58 AM   #9
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What hahah said. As long as they do not have the same CUSIP, I cannot imagine that the IRS would care. They've got bigger problems to solve, like people claiming tax refund from behind bars for example.

Nowadays, most stocks and MFs move up and down together world-wide (though some move more than others) that the wash sales rule becomes meaningless anyway.
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Old 12-16-2014, 08:34 AM   #10
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I'm not sure about this same CUSIP thing. For example, if you sold the Admiral version at a loss and then bought the Investor shares or the ETF then I think you would be at risk, even though the CUSIPs and tickers are different.
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Old 12-16-2014, 09:06 AM   #11
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or just wait 31 days and buy back the same security. Maybe the international markets will bottom by then.
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Old 12-16-2014, 09:23 AM   #12
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I'm not sure about this same CUSIP thing. For example, if you sold the Admiral version at a loss and then bought the Investor shares or the ETF then I think you would be at risk, even though the CUSIPs and tickers are different.
+1

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Old 12-16-2014, 11:03 AM   #13
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ETFs have been mentioned, but without ticker symbols.

VTIAX to VXUS would be considered a wash sale since this are substantially identical (same fund, different share classes).

VTIAX to VEU would not be wash sale. VTIAX to VFWAX (already mentioned), not a wash sael.

VTIAX to VEU + VSS, not a wash sale.

VTIAX to VEA, VWO, VSS, not a wash sale.

Lots of other combos are possible.
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Old 12-16-2014, 11:58 AM   #14
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Originally Posted by pb4uski View Post
I'm not sure about this same CUSIP thing. For example, if you sold the Admiral version at a loss and then bought the Investor shares or the ETF then I think you would be at risk, even though the CUSIPs and tickers are different.
Yes, this can get complicated. Anyway, it is very easy to more or less duplicate the performance characteristics of whatever you are selling with a buy that will not trigger wash sale. The broker doing the transaction and tax reporting is key.


When I mentioned the CUSIPO angle, I was making a verbatim report, not stating something that I have independent knowledge of. Broker reps can be wrong too, even those that deal with larger account clients. Still, I would never get hung up in arcana- just leave a reasonable margin around your cut.

Ha
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Old 12-16-2014, 12:06 PM   #15
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I'm not sure about this same CUSIP thing. For example, if you sold the Admiral version at a loss and then bought the Investor shares or the ETF then I think you would be at risk, even though the CUSIPs and tickers are different.


I had thought about the different classes and was going to bring that up...

I wonder what Vanguard would do with your example... IOW, when I went from Investor to Admiral, there was no tax issue... gain or loss.... they just converted....

In your example, I wonder if they would even allow it to happen... but if they did, then the wash rules would apply since the 'fund' is the same, it is only the administration that is different... same for selling a fund and buying the same as an ETF....
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Old 12-16-2014, 12:08 PM   #16
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I'm not sure about this same CUSIP thing. For example, if you sold the Admiral version at a loss and then bought the Investor shares or the ETF then I think you would be at risk, even though the CUSIPs and tickers are different.
Well, I would not go on just the CUSIP alone, literally. But I doubt if the IRS cares if you trade between Total Market or the S&P, or a large cap ETF. There is so much overlap between funds, and who has the exact definition of "substantial"?
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Old 12-16-2014, 01:10 PM   #17
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When I was doing tax loss harvesting during the last big crash, I used this approximation chart to shift into other funds, yet still hold my position.

Approximating total stock market - Bogleheads
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