Wash sale rules for SPY vs VTI

[Hamlet]

Does anyone know whether it would be ok to sell SPY to buy VTI and take the tax loss?

Or are these funds too close to each other to avoid the wash rules?

Thanks.

 

[Grep]

The general wisdom is that this is perfectly fine.

 

[ziggy29]

I would think that's okay since a "total market" index isn't the same as a large cap stock index and would thus avoid the "substantially identical" test.

If you replace one S&P 500 index fund with another S&P 500 index fund, that would likely fail the smell test.

(Not a tax lawyer or CPA.)

 

[Spanky]

It should be okay.

I am thinking about selling VTI, along with 9 other funds, and buy VT.

 

[LOL!]

First, there are no rules. The IRS has not ruled on this. There are only interpretations of IRS wording.

That written, I recently sold SPY and bought VTI in a tax-loss harvesting move. In my opinion, there will be no wash sale as these ETFs appear to not meet the "substantially identical" terminology of the IRS in my opinion.

Thus, in the end, you have to make up your own opinion.

 

[travelover]

I'm skeptical that these wash sale laws are even enforced unless you are unlucky enough to offend someone in the IRS.

 

[ziggy29]

I'm skeptical that these wash sale laws are even enforced unless you are unlucky enough to offend someone in the IRS.

It's like anything: given the small percentage of returns that are audited, a lot of tax laws are rarely enforced unless it's something the computer picks up about your return that's clearly wrong.

Still I wouldn't want to explain in an audit that selling SPY and immediately buying VFINX wasn't a wash sale...

 

[travelover]

It's like anything: given the small percentage of returns that are audited, a lot of tax laws are rarely enforced unless it's something the computer picks up about your return that's clearly wrong.

Still I wouldn't want to explain in an audit that selling SPY and immediately buying VFINX wasn't a wash sale...

Perhaps, but I think a lot of the hand wringing here and at the Bogleheads' forum is a wasted effort. The average IRS agent probably doesn't even know the difference between an index fund and a managed fund, let alone the fine points of asset allocation.

 

[2B]

I sold SPY and IWD for a $60K loss and moved all the money into VTI. I think it was within the letter and spirit of the law. I also don't think they will care unless it was for the equivalent index fund with another name on it.