Tax Loss Harvesting Fund/ETF selection

[Closet_Gamer]

Well, the world has presented me with a lovely tax loss harvesting opportunity.

Would love suggestions on two topics:

1) does anyone know of a good tool that suggests replacement, but not substantially similar, funds that can be used to hold the money during the wash sale period? Given the current volatility, I do not want to be out of the market for the next 30 days....while we're all staring at the down side, stranger things have happened than a big rebound

2) Other than the wash sale period, does anyone have suggestions on how best to approach or gotchas to watch out for?

Thanks!

 

[LOL!]

1. Some people have looked at the lists given by the robos that do tax loss harvesting such as Wealthfront or Betterment. In reality it is stupidly easy to figure out replacements based on one's own personal broker and situation, but only if you know what you bought in the first place.

2. Gotcha: Dividends that were qualified maybe become non-qualified if you don't hold your shares for the 61 day personal holding period as defined by the IRS. But don't overthink this because it may not change your taxes very much.

3. Don't overthink this. Mistakes are not life threatening, but do create useful learning opportunities.

 

[Sunset]

I just look at what the stock I'm selling is, and buy a different company for individual stocks.
For mutual funds or ETF's , I would look at the collection of underlying stocks trying to pick 2 pairs that are different in some large degree, knowing there will be a little overlap.

To avoid this issue, when doing conversion I moved in kind the ETF's from IRA to ROTH , so I can if desired buy the same now low priced ETF and not have a wash sale, as nothing was sold.

 

[Closet_Gamer]

1. Some people have looked at the lists given by the robos that do tax loss harvesting such as Wealthfront or Betterment. In reality it is stupidly easy to figure out replacements based on one's own personal broker and situation, but only if you know what you bought in the first place.

2. Gotcha: Dividends that were qualified maybe become non-qualified if you don't hold your shares for the 61 day personal holding period as defined by the IRS. But don't overthink this because it may not change your taxes very much.

3. Don't overthink this. Mistakes are not life threatening, but do create useful learning opportunities.

Thanks. Didn't know about the divvy issue.

 

[Closet_Gamer]

I just look at what the stock I'm selling is, and buy a different company for individual stocks.
For mutual funds or ETF's , I would look at the collection of underlying stocks trying to pick 2 pairs that are different in some large degree, knowing there will be a little overlap.

To avoid this issue, when doing conversion I moved in kind the ETF's from IRA to ROTH , so I can if desired buy the same now low priced ETF and not have a wash sale, as nothing was sold.

The Roth thing is super clever.

Thanks!

 

[LOL!]

Thanks. Didn't know about the divvy issue.

In that case, you should read the IRS documentation on this because otherwise I may have left you with an incomplete impression of the issue. You will need to fully understand this for your own good.

 

[Closet_Gamer]

In that case, you should read the IRS documentation on this because otherwise I may have left you with an incomplete impression of the issue. You will need to fully understand this for your own good.

Read and understand something? Dang, this is getting hard! Maybe I should pay someone 1% of everything I own to read it for me.

Thanks. Appreciate the steer.

 

[Closet_Gamer]

Another harvesting question:

When managing wash sale issues, can FIFO be used to avoid wash sales triggers?

For example, I have 20 shares of xyz.

I bought 1 of them last week
I bought 19 of them last year.

I sell 10 shares at a loss vs. what I paid the previous year.

Does the 1 share that I bought last week jeopardize my ability to capture the loss on the 10 shares that I sold?

Or does the first-in-first-out approach allow me to capture the loss because I'm continuing to hold the newer share?

Thanks.

 

[Closet_Gamer]

Another harvesting question:

When managing wash sale issues, can FIFO be used to avoid wash sales triggers?

For example, I have 20 shares of xyz.

I bought 1 of them last week
I bought 19 of them last year.

I sell 10 shares at a loss vs. what I paid the previous year.

Does the 1 share that I bought last week jeopardize my ability to capture the loss on the 10 shares that I sold?

Or does the first-in-first-out approach allow me to capture the loss because I'm continuing to hold the newer share?

Thanks.

Nevermind, I just re-read the IRS publication. I would need to net the recent purchase against the older shares and then adjust the remaining cost basis.

Crazy complicated to track over the long term.

 

[LOL!]

Another harvesting question:

When managing wash sale issues, can FIFO be used to avoid wash sales triggers?

For example, I have 20 shares of xyz.

I bought 1 of them last week
I bought 19 of them last year.

I sell 10 shares at a loss vs. what I paid the previous year.

Does the 1 share that I bought last week jeopardize my ability to capture the loss on the 10 shares that I sold?

Or does the first-in-first-out approach allow me to capture the loss because I'm continuing to hold the newer share?

Thanks.

No. Holding on to the newer share is exactly what causes the wash sale, so selling that share avoids the wash sale (or allows for a temporarily disallowed loss because of it to become allowed). And the wash sale if created is only for one share's worth, so one might call it a partial wash sale. The adjustment you mentioned would only be an adjustment to that one single share in your example.

So using LIFO which is a subset of Specific Identification or Specific Identification itself where you yourself personally identify that last-purchased share to sell thus avoids the wash sale.

 

[Closet_Gamer]

No. Holding on to the newer share is exactly what causes the wash sale, so selling that share avoids the wash sale (or allows for a temporarily disallowed loss because of it to become allowed). And the wash sale if created is only for one share's worth, so one might call it a partial wash sale. The adjustment you mentioned would only be an adjustment to that one single share in your example.

So using LIFO which is a subset of Specific Identification or Specific Identification itself where you yourself personally identify that last-purchased share to sell thus avoids the wash sale.

Thanks. So complicated!