TLH with dividends reinvested on, wash sales

[SJhawkins]

I want to be sure I got this right, a lazy way to TLH (tax lot harvest)of sorts.

Have funds to take losses on, no surprise I'm sure for many.

Have one taxable account with dividend reinvestments turned off, have dividend reinvestments turned on in all other tax qualified accounts. Let's assume all accounts have the same funds.

If person wants to TLH a fund that has quarterly dividend payouts and avoid the wash sale rule does below work?

If the dividend payouts are 90 days apart and you take 31 days off each end between the dividends that would leave a window in the middle of 28 days (between the dividend dates) to TLH without having to worry about wash sales. Seem reasonable thus far?

Not to get to wrapped up in dividend dates between ETF's and Funds a 20 day window in the middle of a 90 day dividend schedule seems like TLH for dummies would be sane and easy. Thoughts/pitfalls?

I would buy a "not identical" fund or ETF on the same day of the sale (total stock fund vs S&P) as an example and hold that long enough to keep the dividends qualified at minimum, more than likely I would just keep it anyway, what can I say Im lazy!

Found a lot of info about the subject but did not see an example similar to the above, maybe I'm losing my Google skills!

Thanks everyone,

 

[RunningBum]

That should work, if I've read it correctly, but it seems like too much work to be considered lazy. Why not just hold similar but different ETFs in the non-taxable accounts? Then you don't have to worry about wash sales at all, and if a big drop like we had this week happens you can jump on it without having to figure out if you're safely in the non-wash window.

 

[FLSUnFIRE]

Or hold it LT... taxes will come eventually and will be higher with the new lower basis. I harvested in 2008 and due to that my cost basis is very low in my taxable account so almost all proceeds will be taxed. Probably worth doing it for tax rate arbitrage writing off the $3K carry forward on regular income but from a Cap Gains perspective maybe not.... especially if rates are increased/brackets shift down in the future.... are we really going to enjoy the 0% in perpetuity? Just my perspective, made sense for me as I could write off against earned income for a number of years after 2008 and definitely saved me tax I would have paid otherwise.

 

[Montecfo]

That should work, if I've read it correctly, but it seems like too much work to be considered lazy. Why not just hold similar but different ETFs in the non-taxable accounts? Then you don't have to worry about wash sales at all, and if a big drop like we had this week happens you can jump on it without having to figure out if you're safely in the non-wash window.

I think RB has it right. Equity positions in my taxable account are seldom duplicated in my tax-deferred accounts.

If I do duplicate them, I do not reinvest dividends in the same stock. Never a huge fan of that anyway.

And in the ETF world you arguably have a good deal of latitude to own similar ETFs. "Substantially identical" securities would appear to be quite a high bar.

 

[SJhawkins]

That should work, if I've read it correctly, but it seems like too much work to be considered lazy. Why not just hold similar but different ETFs in the non-taxable accounts? Then you don't have to worry about wash sales at all, and if a big drop like we had this week happens you can jump on it without having to figure out if you're safely in the non-wash window.

I agree completely, but for now this is what I have. After 30 Years of investing (mostly tax advantaged) I will admit it's been nice to have all the same funds, makes for a pretty pie chart when you log in

This will be the first TLH, hope it won't become a habit, I should have done some years ago but was just lazy.

 

[SJhawkins]

Or hold it LT... taxes will come eventually and will be higher with the new lower basis. I harvested in 2008 and due to that my cost basis is very low in my taxable account so almost all proceeds will be taxed. Probably worth doing it for tax rate arbitrage writing off the $3K carry forward on regular income but from a Cap Gains perspective maybe not.... especially if rates are increased/brackets shift down in the future.... are we really going to enjoy the 0% in perpetuity? Just my perspective, made sense for me as I could write off against earned income for a number of years after 2008 and definitely saved me tax I would have paid otherwise.

Thanks for the reply, I was looking at it mostly from a earned income point of view for the next few years as you did too, will pay for a few good 5-7 dinners with a cocktail, maybe two.

Thanks again for taking the time to reply

 

[SecondCor521]

I want to be sure I got this right, a lazy way to TLH (tax lot harvest)of sorts.

Have funds to take losses on, no surprise I'm sure for many.

Have one taxable account with dividend reinvestments turned off, have dividend reinvestments turned on in all other tax qualified accounts. Let's assume all accounts have the same funds.

If person wants to TLH a fund that has quarterly dividend payouts and avoid the wash sale rule does below work?

If the dividend payouts are 90 days apart and you take 31 days off each end between the dividends that would leave a window in the middle of 28 days (between the dividend dates) to TLH without having to worry about wash sales. Seem reasonable thus far?

Not to get to wrapped up in dividend dates between ETF's and Funds a 20 day window in the middle of a 90 day dividend schedule seems like TLH for dummies would be sane and easy. Thoughts/pitfalls?

I would buy a "not identical" fund or ETF on the same day of the sale (total stock fund vs S&P) as an example and hold that long enough to keep the dividends qualified at minimum, more than likely I would just keep it anyway, what can I say Im lazy!

Found a lot of info about the subject but did not see an example similar to the above, maybe I'm losing my Google skills!

Thanks everyone,

Remember that it is not only dividends that would create a wash sale; it is any purchase of the TLH'ed security in any account.

So if, for example, you bought some shares of that mutual fund via a 401(k) contribution from a paycheck in that 28-ish day window, you could create a wash sale that way.

 

[SJhawkins]

Remember that it is not only dividends that would create a wash sale; it is any purchase of the TLH'ed security in any account.

So if, for example, you bought some shares of that mutual fund via a 401(k) contribution from a paycheck in that 28-ish day window, you could create a wash sale that way.

Thanks for the reminder and very true

 

[Graybeard]

Remember that it is not only dividends that would create a wash sale; it is any purchase of the TLH'ed security in any account.

So if, for example, you bought some shares of that mutual fund via a 401(k) contribution from a paycheck in that 28-ish day window, you could create a wash sale that way.

IIRC the same restrictions would hold true for a spouse, I vaguely recall that. Maybe that applies only if filing jointly.

 

[SJhawkins]

IIRC the same restrictions would hold true for a spouse, I vaguely recall that. Maybe that applies only if filing jointly.

From my understanding that is true as well.