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Tax harvest vs Wash sale (check me before I blunder?)
Old 10-18-2021, 07:43 PM   #1
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Tax harvest vs Wash sale (check me before I blunder?)

I’ve searched a few of these threads but couldn’t find a specific answer to my question…

I own FXNAX (fidelity us bond index fund). I’m sitting on about 7k losses on it. ~95% are long term so I wanted to sell them to offset some gains this year. Im still working so In a high tax bracket and will have lots of long and short term gains to offset (due to some investment). A few of the div reinvestments are short term losses since they are less than a year.

I have never done tax harvesting but was thinking, if I understand correctly, that I could sell this at a loss and buy BND (vanguard total bond etf) on the next day*.

Would this be considered a wash sale? I was thinking since one is Fido and another vanguard, and one a fund and one an etf, that they wouldn’t be so similar as to create an issue. But I wanted to double check with the collective wisdom of those on the forum…

1. Is this a valid tax harvest?
2. Is it a wash sale?
3. Should I just leave the trivial amt left there until it becomes long term? Or does it not matter since it’s also all a loss at this point and I will have some short term gains to offset?
4. Is the default fifo tax lots?

*I have enough cash in account where I don’t need to wait for the settlement of one to buy the other.

Thanks!
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Old 10-18-2021, 08:18 PM   #2
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1. Not sure what you mean by valid. "Loss harvesting" and "gain harvesting" are both valid tax planning moves. If you sold all of your FXNAX position, from your own description you would realize about $6,650 in long term capital losses, and about $350 in short term losses.

2. I think it is not a wash sale, and I think most would agree with me.

3. If you want to sell, there's no reason to. Short term losses are, in general, more valuable than long term losses, so if anything, it'd be better to sell sooner rather than later for lots where you have losses. Your short term losses will offset any short term gains first, then any long term gains second (sounds like you don't have any of these).

Short term gains are taxed at ordinary income tax rates, so they're usually best avoided, but if it's a small lot from dividend reinvestment or something like that and you value simplicity, it's probably not that big of a deal.

4. I think the default depends on your broker. Ask them.
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Old 10-19-2021, 12:50 AM   #3
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1. Yes
2. No
3. No - just do it all to make it clean now and going forward
4. Generally yes, however, you have the ability to change the default to something else. If you go to Account Features->Brokerage and Trading->Cost Basis Information Tracking, it will provide a list of your accounts and the current default setting for determining cost basis for both mutual funds and stocks/ETFs. You also have the ability to change it individually by sale in the period after the trade but before settlement by going to the Account Positions->Activities and Orders->History Tab->Scroll to bottom->Reassign the lots
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Old 10-19-2021, 10:12 AM   #4
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Thanks everyone!
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