[snip]
I'm not a professional trader, just an investor per <https://www.irs.gov/taxtopics/tc429>.
1. I understand that the dividend reinvestment counts as a purchase,
so I have to wait 30 days after March 4th to sell the BND in my
taxable account if I want to avoid a wash sale. Is that right, or do automatic dividend reinvestments not count as purchases for wash sale purposes?
2. I plan to sell all of the BND in my taxable account on Monday,
April 4th, after the monthly dividend is paid. Can I switch my IRAs
back to automatic reinvestment, or must I wait 30 days after April
4th if I want to avoid the May 4th dividends in the IRAs creating a
wash sale situation?
3. Am I overthinking this? Do automatic dividend reinvestments in an
IRA actually count as a purchase for wash sale purposes? (Pub 505
implies that they do, since they're an acquisition of shares.)
On Tuesday, March 29, 2022 at 8:11:58 AM UTC-7, Stan Brown wrote:
1. I understand that the dividend reinvestment counts as a purchase,
so I have to wait 30 days after March 4th to sell the BND in my
taxable account if I want to avoid a wash sale. Is that right, or do automatic dividend reinvestments not count as purchases for wash sale purposes?
So it is a purchase.
And a very pernicious one, as typically it is for a relatively small amount and
yet triggers all of the wash sale accounting headaches.
2. I plan to sell all of the BND in my taxable account on Monday,
April 4th, after the monthly dividend is paid. Can I switch my IRAs
back to automatic reinvestment, or must I wait 30 days after April
4th if I want to avoid the May 4th dividends in the IRAs creating a
wash sale situation?
The rule is a repurchase within 30 days before or after the sale.
So you need to wait until after May 4th, as April only has 30 days.
But I do wonder why you are trying so hard to precisely time this.
I don't expect that the two months of interest will amount to that
much relative to the bond price. It looks like the yield is less than
3% per year. So I would think you could give yourself a bit more
of a time cushion and then buy more shares (using the cash
dividends) after the wash sale window has passed.
3. Am I overthinking this? Do automatic dividend reinvestments in an
IRA actually count as a purchase for wash sale purposes? (Pub 505
implies that they do, since they're an acquisition of shares.)
They do count.
Not so much "to precisely time" as just a desire to have it over
with. I have low tolerance for unfinished business, so having this
pending until the first week of May is not ideal. But letting myself
in for all the wash-sale accounting would be even less pleasant.
You only have a wash sale adjustment for as long as you hold the "substantially identical" stock. Even if you purchased new shares on March 4, as long as you sell ALL your investment in this or "substantially identical" stock (even if at a loss, evenif within 30 days of that purchase), and no longer hold ANY shares of that stock ANYwhere (in taxable or tax-deferred accounts), you do not have any wash sales to worry about (see the definition of wash sales). So if you sell ALL, you can sell on March 5.
Maria U. Ku, CPA
Oakland, CA
--
Hypothetically, a taxpayer sells 100 shares of an ETF, harvesting a
long-term capital loss. Three weeks later, they receive 2.471 shares
of the same ETF through the brokerage's automatic dividend
reinvestment program.
Does that count as a wash sale in the same way as an intentional
purchase would?
And if it does count as a wash sale, does the
investor lose all the tax benefit of the loss on the 100 shares, or
only 2.471% of it to match the shares "purchased"?
Sysop: | Keyop |
---|---|
Location: | Huddersfield, West Yorkshire, UK |
Users: | 285 |
Nodes: | 16 (2 / 14) |
Uptime: | 67:20:45 |
Calls: | 6,488 |
Calls today: | 1 |
Files: | 12,096 |
Messages: | 5,275,152 |