Wash sales, target date funds, Betterment, Employee Retirement

[rollergrrl]

In my employee retirement 457 plan it offers vanguard target date funds and inside those funds it has index funds that are the exact same as my Roth IRA with betterment. Would this cause a wash sale when assets are rebalanced? Also would this cause issues with purchasing these index funds in taxable accounts such as VTI seeing that it’s in both 457 and Roth? Thank you for your help [emoji4]

[PaunchyPirate]

Quote:

Originally Posted by rollergrrl In my employee retirement 457 plan it offers vanguard target date funds and inside those funds it has index funds that are the exact same as my Roth IRA with betterment. Would this cause a wash sale when assets are rebalanced? Also would this cause issues with purchasing these index funds in taxable accounts such as VTI seeing that it’s in both 457 and Roth? Thank you for your help [emoji4]

I don't see how this would be a wash issue. The overall holding fund is fundamentally a different mix than the individual funds. Two different funds that both happen to hold Apple stock would not be considered substantially similar based on that fact alone.

[rollergrrl]

Quote:

Originally Posted by PaunchyPirate I don't see how this would be a wash issue. The overall holding fund is fundamentally a different mix than the individual funds. Two different funds that both happen to hold Apple stock would not be considered substantially similar based on that fact alone.

In the Roth IRA betterment account it’s not a fund but is actually the purchase of VTI. Would that cause issues if I hold VTI in a taxable account and sell it in the future or rebalance either account.

[gauss]

My understanding is that if you hold the same security in multiple accounts and bear no market risk when you simultaneously buy/sell in both accounts that this would indeed be considered a wash sale in the taxable account (if that is where the loss shows up).

Of course, your broker would not report it to you so it would be your responsibility to keep track of this, portfolio wide, in order to be 100% compliant with the tax rules.

-gauss

[rollergrrl]

Quote:

Originally Posted by gauss My understanding is that if you hold the same security in multiple accounts and bear no market risk when you simultaneously buy/sell in both accounts that this would indeed be considered a wash sale in the taxable account (if that is where the loss shows up).

So as long as I don’t have the VTI in a taxable account, there shouldn’t be an issues with wash sales. Does the 457 became a wash sale concern when I start withdrawing money and rebalance Roth IRA?

[gauss]

I believe that the answers to your two questions are:

Quote:

So as long as I don’t have the VTI in a taxable account, there shouldn’t be an issues with wash sales.

correct

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Does the 457 became a wash sale concern when I start withdrawing money and rebalance Roth IRA?

no

As long as a 457 is treated in a similar fashion to other retirement accounts (ie distributions reported on form 1099-R, but individual trades within the account not reported to the IRS), then I don't think you will incur any wash sales.

Said a bit differently, I don't believe that you would trigger any reportable wash sales if all your trades are restricted to retirement accounts.

It is my understanding that they only come into play when the trades are reported by you on your 1040 Schedule D (Capital Gains and Losses) and generally are reported to you by your broker on form 1099-B -- ie in a taxable account.

If you are only trading in retirement accounts then there are no reportable capital gains or losses.

-gauss

[rollergrrl]

Quote:

Originally Posted by gauss I believe that the answers to your two questions are: correct no As long as a 457 is treated in a similar fashion to other retirement accounts (ie distributions reported on form 1099-R, but individual trades within the account not reported to the IRS), then I don't think you will incur any wash sales. Said a bit differently, I don't believe that you would trigger any reportable wash sales if all your trades are restricted to retirement accounts. It is my understanding that they only come into play when the trades are reported by you on your 1040 Schedule D (Capital Gains and Losses) and generally are reported to you by your broker on form 1099-B -- ie in a taxable account. If you are only trading in retirement accounts then there are no reportable capital gains or losses. -gauss

Appreciate your response, thank you

[gauss]

Glad I could help.

-gauss