Wash sale questions -- "moving" stocks from one account to another

[The Cosmic Avenger]

I generally try to keep a two-fund portfolio, but the few stocks I've bought I try to buy and hold, so I never really even heard or had to think about the wash sale rule. I only know about it from reading this forum, really.

Quick background: I decided to dabble in stocks where I knew the company and industry back in 2009, when I had a small inherited IRA that I could consider "fun money" instead of part of my retirement savings. I bought Google and Apple, and have held them ever since. After reading this board more regularly, I've realized that I should hold these stocks in a taxable account, as when I eventually sell, the LTCG tax would be more favorable than income tax on the entire amount.

Since we're going through a huge bear market, I'm thinking about selling those stocks soon, and buying a bond fund in the inherited IRA. Then I'll sell some bonds in a taxable account* I have, and buy that same stock in the taxable account. (*Taxable account is an inherited non-retirement account; I just kept the positions my father had out of inertia, and a bit of nostalgia, something I've come to realize was a mistake. I should have sold everything on the stepped-up basis and bought into the two funds in the two-fund portfolio I have elsewhere.)

So, the wash sale rules apply across accounts, right? Selling at a loss in one account and buying from another would be too easy a way to circumvent IRS rules, I would think. What if I care more about transferring the shares and don't want to declare a loss? That might seem stupid, but would there be any problem with a "wash sale" if I don't declare the loss? Or should I try to wait 30 days and repurchase? I'm a bit concerned that we could see a recovery start by then, although I wouldn't put good odds on it, it would still be a big risk that tech stocks could shoot back up.

 

[copyright1997reloaded]

Yes, rules apply across accounts, and even with related parties (e.g. spouses)

Instead, just sell one thing and buy another that will have a good correlation.

 

[The Cosmic Avenger]

Yes, rules apply across accounts, and even with related parties (e.g. spouses)

Instead, just sell one thing and buy another that will have a good correlation.

Thanks, but I'm kind of attached to those two companies, and I try to stay away from those companies or industries I don't know as well. Apple and Google are more diversified than most people realize, so I felt they could weather a disruption in any one of their product lines (for example, laptops or cell phones or search engines or streaming devices/services). Intel or Qualcomm might be two others, I guess, but they're not quite as diverse...that I'm aware of. The main reason I added Tesla was that they were into not just EVs, but solar panels and other kinds of high-capacity batteries (Powerwall) and EV infrastructure (superchargers).

I'll have to do some more research...a good time for it, I guess, now that we're self-isolating!

 

[RunningBum]

If you bought Google and Apple in 2009, would they really be selling at a loss today?

But to directly answer your question, yes, it applies to moving them between accounts. I'm not totally sure of the IRA->taxable direction. I do know that for taxable->IRA, it's the worst move you can make, because you can't take the capital loss in your taxable account, and it doesn't apply in an IRA. Normally for a wash sale in taxable you are just deferring when you can take the loss, but in the taxable->IRA direction the loss is gone forever.

 

[The Cosmic Avenger]

If you bought Google and Apple in 2009, would they really be selling at a loss today?

But to directly answer your question, yes, it applies to moving them between accounts. I'm not totally sure of the IRA->taxable direction. I do know that for taxable->IRA, it's the worst move you can make, because you can't take the capital loss in your taxable account, and it doesn't apply in an IRA. Normally for a wash sale in taxable you are just deferring when you can take the loss, but in the taxable->IRA direction the loss is gone forever.

Good points, thanks! If I sold TODAY, no, but at this point I'm not assuming anything! And you're right, the whole thing is moot since I couldn't take a loss for a withdrawal from an inherited IRA!

Ugh. I finally have a good handle on my individual accounts, but I'm trying to think of our assets as a whole and how to manage them that way instead of individually, and it's tripping me up.

 

[cathy63]

You can sell stock in the IRA and buy the same thing in the taxable account. If you sell in an IRA, there's no loss to declare or basis to adjust since 100% off those funds will be taxed as income when you withdraw them. Your purchase in the taxable account will have a basis of whatever you pay for it.

If you have a loss on the bond fund that you sell in the taxable account and then you buy the same fund in the IRA, then you can't include that loss on your 2020 taxes. You also won't be able to take that loss and use it to establish a basis in the IRA. If this is your concern, you would be better off to sell the bond fund at a loss, sell the stocks in the IRA and then use the IRA money to add to your two-fund portfolio.

 

[kaneohe]

......................

Quick background: I decided to dabble in stocks where I knew the company and industry back in 2009, when I had a small inherited IRA that I could consider "fun money" instead of part of my retirement savings. I bought Google and Apple, and have held them ever since...............................

Since we're going through a huge bear market, I'm thinking about selling those stocks soon, and buying a bond fund in the inherited IRA. Then I'll sell some bonds in a taxable account* I have, and buy that same stock in the taxable account. ....................................................

So, the wash sale rules apply across accounts, right? Selling at a loss in one account and buying from another would be too easy a way to circumvent IRS rules, I would think. What if I care more about transferring the shares and don't want to declare a loss? That might seem stupid, but would there be any problem with a "wash sale" if I don't declare the loss? Or should I try to wait 30 days and repurchase? I'm a bit concerned that we could see a recovery start by then, although I wouldn't put good odds on it, it would still be a big risk that tech stocks could shoot back up.

You will not have a loss selling within the IRA. There is no taxable consequence of selling within the IRA so you could sell within IRA and buy same in taxable w/o any problem.

If you were to transfer shares in kind from IRA to taxable acct, you would pay taxes on that withdrawal based on value of shares.

 

[BarbWire]

(*Taxable account is an inherited non-retirement account; I just kept the positions my father had out of inertia, and a bit of nostalgia, something I've come to realize was a mistake. I should have sold everything on the stepped-up basis and bought into the two funds in the two-fund portfolio I have elsewhere.)

Glad I'm not the only one who did this ....

I was swamped with being the executor of two estates in 2016, and just let the inherited IRA and the inherited taxable-accounts ride with Wellington and Wellesley -- not the best things for me to have in a taxable account. Now I'm thinking that I should use this slump to finally clean it up. I"ll still have a chunk of LTCG to pay, but less.

 

[Out-to-Lunch]

I think you may have gotten the info you need above, but let me be explicit. The only thing you mentioned selling in taxable is a bond fund. (A) Do you have a loss on the bond fund? (B) If so, are you really tied to buying the same (or substantially similar) bond fund in the IRA?

If you have a loss on the bond fund that you sell in taxable, I imagine you could find a different bond fund in the IRA that you could live with for 30 days, if not forever. Think Treasuries instead of corporate or AGG/BND, or vice versa. Or just go to cash for 30 days.

 

[The Cosmic Avenger]

I think you may have gotten the info you need above, but let me be explicit. The only thing you mentioned selling in taxable is a bond fund. (A) Do you have a loss on the bond fund? (B) If so, are you really tied to buying the same (or substantially similar) bond fund in the IRA?

If you have a loss on the bond fund that you sell in taxable, I imagine you could find a different bond fund in the IRA that you could live with for 30 days, if not forever. Think Treasuries instead of corporate or AGG/BND, or vice versa. Or just go to cash for 30 days.

Thanks. I think I've got less than $100K in those two stocks now, but close, and that's still more of a tax hit than I want to take. I think I will sell those and buy a bond fund, and then sell about $100K of stocks and bonds in the taxable account (I've spotted a few positions where the gains and losses will be very close to balancing out), and buy Google and Apple. That will partially divest me of my dad's more complicated holdings and get me closer to the two-fund AA across all my accounts, with the exception of the two tech stocks that I bought with "fun money".

BarbWire, let us know how it goes! This is why I've been advising people with new inheritances to liquidate and reinvest according to their AA. Once inertia takes over for a while, it's too easy to just keep letting things slide if there's no big down side, but I really would like to simplify, so now is probably as good a time as any.