So a 500 index for another 500 index.... I think it is a wash sale rule by the definitions BUT the IRS hasn't enforced to my knowledge.
However what about selling the total stock, and then buying the 500+extended? Technically very different funds, but when you add the later together they equal the former.
Wash Sales
You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade,
Acquire a contract or option to buy substantially identical stock or securities, or
Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.
If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.
If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities includes the holding period of the stock or securities sold.
The key term in all of this is 'substantially identical securities.' My interpretation is that trading two 500 index funds from different companies would count, but the IRS hasn't enforced this. My interpretation would also be that trading the total stock for extended+500 is substantially.... they are IDENTICAL.... securities. The ticker symbol is different, but the underlying securities are the same. I feel the IRS 'could' enforce this, but they don't. I feel that the more this gets abused the more the IRS is going to care and come after it.
Lets just say if you got audited and you got a particularly zealous agent I wouldn't want to be the person trying to justify how it wasn't a wash sale violation.
Not to long ago people were taking advantage of the IRA indirect rollover rules to basically loan themselves large sums for very long(longer than the 60 day) periods. The IRS got tired of, and made an example out of a guy... now you can't do it.
If the IRS wanted to make an example again... I wouldn't want to be Betterment or Wealthfront's top client.