Can someone give me a wash sale avoidance green light?

[Quantum Sufficit]

Hello,

I have read about the wash sale and vanguard tax loss pairs. On March 2nd 2020 I executed a tax loss harvest by selling Total stock market admiral and purchasing index 500. (the trade date 3/2, settled 3/3). Vanguard cost basis realized section rewards me with a 51k short term capital loss free of wash sale flags. Subsequently since that time both index 500 and total stock market paid a march dividend. I still hold total stock in Ira's but diverted dividends to the federal money market where they still sit in my wife's IRA and mine. The dividends paid by index 500 from my taxable acct. were swept out to my bank acct to use for expenses.

Now it is 4/2. I would like to reverse the trade and rebuy Total stock and sell index 500 in taxable and claim (Unfortunately a much larger) capital loss. I counted day 1 as 3/3/20 and therefore today's trade date marks day 31. Am I all clear? Please help market closes 50 minutes!

 

[MichaelB]

I count April 2 as day 31.

 

[Quantum Sufficit]

What day did the first sale settle on?

the first TLH from Total stock ---> Index 500 executed on trade date 3/2, settled 3/3 (mutual funds, not etfs)

 

[MichaelB]

What day did the first sale settle on?

I think the wash rule is based on transaction date.

 

[Quantum Sufficit]

I count April 2 as day 31.

So Michael, am I good?. I made no trades in any stock funds in the 30 days PRECEDING 3/2.

 

[COcheesehead]

I think the wash rule is based on transaction date.

I just looked that up and you are correct. There are exceptions though, but they do not apply to the OP from what I can tell.

 

[MichaelB]

So Michael, am I good?. I made no trades in any stock funds in the 30 days PRECEDING 3/2.

I am not an expert on anything, just ask DW, who is.

 

[Quantum Sufficit]

Anybody else with some input? Thank you Michael and COcheese!

 

[pb4uski]

Why wouldn't you just call Vanguard and ask them... or wait one or two extra days to be sure you are in the clear.

 

[Quantum Sufficit]

Why wouldn't you just call Vanguard and ask them... or wait one or two extra days to be sure you are in the clear.

Well that would be too easy now wouldn't it? For sure, I will check with vanguard but they will say "we cannot give you tax advice"

 

[pb4uski]

Its not tax advice... they should know where they report wash sales and where they don't.

Your question to them is... if I do this trade on this date will Vanguard report it as a wash sale? not tax advice at all.

 

[Quantum Sufficit]

Its not tax advice... they should know where they reort wash sales and where they don't.

Your question to them is... if I do this trade on this date will Vanguard report it as a wash sale? not tax advice at all.

Just as luck would have it I drew a "moron" ball out of the tumbler calling vanguard. No advice for me. "a lot goes into it sir". As I was talking to said braniac, the market closed. Guess I am going to wait another day as suggested

 

[kaneohe]

Just as luck would have it I drew a "moron" ball out of the tumbler calling vanguard. No advice for me. "a lot goes into it sir". As I was talking to said braniac, the market closed. Guess I am going to wait another day as suggested

Sometimes that is a better answer than one that is sure and confident (and wrong)...........always better to know the answer before you ask the question of some random rep if the answer really matters.

And always better to ask on a forum when you have a day or more to get the answer. I think you know the answer but it is better since you are the one who will be affected if you think you know the answer (or add a day to be safe).

https://fairmark.com/investment-taxation/capital-gain/wash/wash-sales-101/

 

[gauss]

If you a worried about the actual reporting of the Wash sale by the brokerage vs the actual wash sale rules, you might want to consider opening a 2nd brokerage account somewhere else. Then 31 days after the initial transaction reverse the transaction in the 2nd brokerage account. Then no wash sale and no inadvertent reporting of a wash sale because the 2 legs of the transaction occurred at different brokerages that had no knowledge of each other.

 

[savory]

I was investigating this today too. Here is the example from the link below. It is Motley Fool which I believe is reliable'

"For example: Lorna bought 100 shares of stock on Jan. 1, 2008. To determine her holding period, she should start counting on Jan. 2, 2008. The second day of each month thereafter counts as the beginning of a new month, regardless of how many days each month contains. If she sells the property on Jan. 1, 2009, her holding period will be one year or less and she will realize a short-term capital gain or loss. If she sells the property on Jan. 2, 2009, her holding period will have been one year and a day, and she will realize a long-term capital gain or loss. See how it works?"

https://www.fool.com/taxes/how-to-calculate-a-holding-period.aspx

 

[kaneohe]

I was investigating this today too. ............

what is this?

 

[savory]

what is this?

It was meant to be a reply to the explanation of a wash sale.

 

[RunningBum]

It was meant to be a reply to the explanation of a wash sale.

Except that it explains long term vs short term gains or losses. Nowhere is wash sale mentioned.

 

[savory]

Except that it explains long term vs short term gains or losses. Nowhere is wash sale mentioned.

One of the questions was when the measurement starts for the sale. This article suggest the 30 day period starts on the day after the sale. That what I was trying to address.

I think the definition of timing for long and short term sale would be the same.

For myself, I was trying to make sure I was outside the 30 day period. Sorry, I it was confusing.

 

[kaneohe]

One of the questions was when the measurement starts for the sale. This article suggest the 30 day period starts on the day after the sale. That what I was trying to address.

I think the definition of timing for long and short term sale would be the same.

For myself, I was trying to make sure I was outside the 30 day period. Sorry, I it was confusing.

the fact that both CG/wash timing starts on day after sale may/may not be a coincidence. The thing that is misleading about the CG timing is that it counts month to month for the same date each month.........that only works because you are going thru a 12 mo cycle but might be misleading if you count Feb 1 to March 1 which is not > 30 days.

 

[savory]

the fact that both CG/wash timing starts on day after sale may/may not be a coincidence. The thing that is misleading about the CG timing is that it counts month to month for the same date each month.........that only works because you are going thru a 12 mo cycle but might be misleading if you count Feb 1 to March 1 which is not > 30 days.

The article explains the point you made.

 

[SecondCor521]

I think the definition of timing for long and short term sale would be the same.

This is a dangerous assumption in general to make.

There are many cases in the realm of taxes where things are approximately similar but different in the precise details.

Some examples, I'm sure there are many more:

1. Dependent. The criteria for dependents differ for purposes of the child tax credit, the earned income tax credit, head of household filing status, education credits, child and dependent care credit, etc. A person who is your dependent for one of these may or may not be your dependent for another one of these.

2. Higher education expenses. These vary depending on whether your talking about QTP distributions, AOTC, LLC, ESA distributions, tuition and fees deduction, student loan interest deduction, education exception on early IRA distributions, etc. An expense that qualifies for one of these may not qualify for another of these.

3. Half year things. You can withdraw from a traditional IRA without the additional 10% penalty after you actually turn 59 1/2. But you can make your first RMD *the year in which you turn* 70 1/2.

4. MAGI. How to calculate your MAGI for different tax benefits differs. See https://www.hrblock.com/tax-center/income/other-income/modified-adjusted-gross-income/

5. How to calculate RMD divisors. For original owners, they calculate their RMD divisors by looking it up on a table each year. For inherited IRAs, they look at the table once then subtract one each subsequent year. (There's an even more convoluted examples for people with inherited IRAs who want to use the new IRS divisor tables in progress.)

In simple situations, which may be more common, perhaps these variances can be ignored. But in even slightly-less-than-simple situations, the variances can come into play and are worth knowing about if one wants to try to comply as well as possible.