Re: wash sale questions
- From: smithff33@xxxxxxx
- Date: 19 Jul 2006 00:04:04 -0700
Zogmorton wrote:
Two questions about the irs "wash sale" rule:
1. If one sold a stock at a loss and immediately bought a like amount of
the stock of another company in the same industry, would that be subject
to the "wash sale" rule?
Probably not, as the two stocks are not "substantially identical".
2. If one sold a stock at a loss in a taxable account, then purchased
the same stock in a tax-free or tax-deferred IRA account, would the wash
sale rule apply?
That is harder to answer, as the IRS has not provided guidance on this
situation. Tax experts are divided on the issue, with some (Kaye
Thomas, Fairmark) arguing for wash sale treatment and others (Ed Slott)
arguing against.
One problem with treating this as a wash sale is that you will NEVER be
able to recognize the loss. In a "normal" wash sale the deferred loss
is added to the cost basis of the replacement shares, and you get the
benefit when you sell those shares (less gain or more loss). That
doesn't happen in an IRA, cost basis is what you paid for the shares
and all withdrawals are taxed as ordinary income. No capital gains or
losses in an IRA.
.
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