Your opinion needed: Does the wash sale rule apply here?

[walkinwood]

Will the wash sale rule kick in if you sell & buy closely related, but not identical index funds?

Eg:
Sell the Large Cap Index and buy the S&P 500 or
Sell the Large Cap Index and buy the Value Index fund

I plan to roll my Windsor II at a loss into the Value Index fund. No issue there.

But I also have a paper loss in Large Cap Index and want to do something about it too. But if I sell it, I could run into trouble since I just bought the Value Index fund. Hence the above question.

Thanks for your input.

[d]

no, as long as they're different funds, wash sale rules won't apply

[CitricAcid]

Won't apply.

[rgarling]

Quote:

Originally Posted by d no, as long as they're different funds, wash sale rules won't apply

I think you would have a wash sale if you sold an SP500 index in a Vanguard account and simultaneously purchased a Fidelity SP500 index. Different funds, but the wash sale rules probably do apply.

[walkinwood]

Quote:

Originally Posted by rgarling I think you would have a wash sale if you sold an SP500 index in a Vanguard account and simultaneously purchased a Fidelity SP500 index. Different funds, but the wash sale rules probably do apply.

You're right. I read that elsewhere too.

Thanks all for your input on the other index funds I mentioned.

[ERD50]

I bet that if you asked the IRS, you would get a different answer depending who you talked to.

Often, those index funds do not invest in every single stock in the index, they may do a statistical weighting. So one could argue that they are not identical investments.

Our tax laws are too complex, when you cannot get a straight answer from the IRS.


-ERD50

[clifp]

The best source of tax info I've found on the web is Fairmark. Although the tax board on the Motley fool is good also, several CPA and former IRS employees answer questions.

Fairmark on wash rules

[youbet]

Quote:

Originally Posted by rgarling I think you would have a wash sale if you sold an SP500 index in a Vanguard account and simultaneously purchased a Fidelity SP500 index. Different funds, but the wash sale rules probably do apply.

Speaking as a non-tax-expert, Id say that since the IRS would charge you capital gain tax (if you had a gain) if you sold Vanguard S and P 500 and bought Fidelity S and P 500, then the converse should be true. If you have a loss, the same transaction should not incur the wash sale rule.

[ERD50]

Quote:

Originally Posted by youbet Speaking as a non-tax-expert, Id say that since the IRS would charge you capital gain tax (if you had a gain) if you sold Vanguard S and P 500 and bought Fidelity S and P 500, then the converse should be true. If you have a loss, the same transaction should not incur the wash sale rule.

Yes, but the wash sale rule is a one-way street anyhow. Even with truly identical holdings. So that test does not distinguish.

If I sell ABC stock at a a gain, and buy ABS stock back the same day even (or with 31 days or whatever), I incur a cap gain. It makes no difference that the purchase is identical - a gain is a gain.

When taking a loss, only an 'identical' (with possible shades of grey in that) purchase in the time period will disallow the loss. Nice, huh?

They even rig the rules on a game that is already 'rigged'. I have to remind myself, don't blame the IRS, blame Congress.

-ERD50

[ERD50]

Quote:

Originally Posted by clifp The best source of tax info I've found on the web is Fairmark. Although the tax board on the Motley fool is good also, several CPA and former IRS employees answer questions. Fairmark on wash rules

Yes, that is a good source, and indicates what a problem these tax laws are. Here's their take on option sale washes...

Quote:

These remarks are simply my interpretation, and won't necessarily reflect the interpretation of the IRS or the Treasury. What's more, other tax pros may have a different take on this question. Unfortunately, there's no sign that official guidance on these issues will be forthcoming in the near future.

Thank you Congress....

Hmmm, does this fit under 'No Taxation without Representation'? I mean, how can I be represented when they can't even tell me what the tax laws represent? This stuff gets me mad


-ERD50

[soupcxan]

Does anyone have an opinion about whether Vanguard's Equity Income Fund (VWITX) is too similar to Vanguard's High Dividend Yield Index Fund (VHDYX) to get around the wash sale rule? I am thinking that since one is active and the other is indexed, they are different enough, even though they are from the same fund company.

[rgarling]

Replacing vwitx with vhdyx (or vice versa) would not be a wash

[soupcxan]

Sorry, I typed the ticker wrong. VG Equity Income is VEIPX, not VWITX (which is a muni bond fund and obviously not a wash sale). Both Equity Income and High Dividend Yield focus on dividend paying stocks, but not exactly the same holdings. So probably in the gray area, but I'd be interested to hear ideas.

[clifp]

As ERD50 says the rules are so muddled that I wouldn't even hazard to make a guess.
My impression is that unless it is obvious the same type of i.e fidelity vs Vanguard S&P 500, I'd ignore the wash rule and let the IRS, tell you are wrong.

The good news is I haven't heard that the IRS is vigorously enforcing wash rules.