Author Topic: Another tax loss harvesting question & wash sale  (Read 2138 times)

JJsfr

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Another tax loss harvesting question & wash sale
« on: January 20, 2016, 10:14:02 AM »
A little background here...
I sold all of my shares of AWSHX on January 4th. I'd had them for quite some time and realized approx ~$11k worth of cap gains. Even though some dividends had reinvested higher than the sell price a few weeks before (within 30 days of the sell), my understanding is that the wash sale rule doesn't apply because they weren't replacement shares.

I bought VTI (total market) the following day, and given the current market I'd like to realize some losses to offset the aforementioned cap gains. Standard advice is to go from VTI to VOO, the S&P index.

Is VOO too similar to AWSHX and would it trigger a wash sale? Other alternatives? Maybe I'll just wait a couple weeks before doing anything for peace of mind.

MDM

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Re: Another tax loss harvesting question & wash sale
« Reply #1 on: January 20, 2016, 06:18:41 PM »
Is VOO too similar to AWSHX and would it trigger a wash sale? Other alternatives? Maybe I'll just wait a couple weeks before doing anything for peace of mind.
Based on the excerpt below from https://www.americanfunds.com/individual/investments/fund/awshx, AWSHX seems different from the S&P 500.  Of course, IANAL.

Quote
Distinguishing Characteristics
The fund seeks to be at least 95% invested in equity-type securities. The fund invests in stocks that meet strict standards evolving from requirements originally established by the U.S. District Court for the District of Columbia for the investment of trust funds. May not invest in companies that derive their primary revenues from alcohol or tobacco.

MustacheAndaHalf

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Re: Another tax loss harvesting question & wash sale
« Reply #2 on: January 21, 2016, 12:18:26 AM »
Reinvested dividends are treated as two separate events for IRS purposes:
1) You gained money from a mutual fund as a dividend.  You're taxed on the dividend.
2) You purchased shares of the mutual fund.
So if you sold within 30 days of a reinvested diividend, you have a wash sale in the amount of the dividend.
https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010601

MDM

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Re: Another tax loss harvesting question & wash sale
« Reply #3 on: January 21, 2016, 12:55:13 AM »
I sold all of my shares of AWSHX on January 4th. ...some dividends had reinvested ... within 30 days of the sell....

So if you sold within 30 days of a reinvested diividend, you have a wash sale in the amount of the dividend.
https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010601

For practical purposes, if you sold all the shares then your taxable gain will be what you have calculated.

See http://fairmark.com/capgain/wash/index.htm for more details.

JJsfr

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Re: Another tax loss harvesting question & wash sale
« Reply #4 on: January 21, 2016, 07:27:33 AM »
Thanks MDM, and mustache and a half. I originally thought that about the reinvested dividends,  until I found MDM's link. Good to have it come up again.
« Last Edit: January 21, 2016, 07:29:35 AM by JJsfr »

seattlecyclone

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Re: Another tax loss harvesting question & wash sale
« Reply #5 on: January 21, 2016, 07:35:14 AM »
Yes, if you had held on to the shares from reinvesting dividends, those could count as "replacement shares." Applying the wash sale rule would be pretty silly here, given that you actually sold these shares at the same time as the rest. You add the amount of the loss to the basis in your replacement shares, recalculate the loss, realize that it's a wash sale, add the amount of the loss to the basis in your replacement shares, recalculate the loss,...