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Wash Sale Rule

willmatt72
in Fund Discussions
Still a bit confused about wash sale rules pertaining to mutual funds. We all know that mutual funds hold many investments and that they overlap from one fund to the next. I'm in the process of selling some bond funds and wondering if I can buy back other bond funds without triggering a wash sale. For example, if I want to sell DBLTX and buy ISIAX, does that trigger a wash sale? Where is the fine line between triggering and not triggering a wash sale? To me, the term "substantially identical" does open itself up to interpretation. What about selling an intermediate term bond fund and buying a short-intermediate term bond fund? Just trying to get a better handle on this concept.

Comments

  • msf
    I've been buried for the past few days in a lot of stuff, including composing a letter to Pershing on wash sale rules (and why they're wrong - hard to prove when the IRS has been silent on much of this). At least that means I'm pretty current on this topic.

    Short answer - don't worry, be happy, your examples are nowhere close to being substantially identical properties.

    Intermediate answer - the IRS won't say, it's between you, your accountant, and if it comes to that, their auditors. Generally, the belief is that unless you're swapping index funds (of the same or perhaps similar indexes) you're okay.

    Longer answer - excellent (long) column by kitces, which shows why you don't really want to know:
    https://www.kitces.com/blog/the-wash-sale-problem-when-tax-loss-harvesting-almost-substantially-identical-mutual-funds-and-etfs/
  • willmatt72
    As always, thanks for the info and insight, msf.
  • VintageFreakVintageFreak
    I would just add some times people forget that the 30 day interval for both buying AND selling substantially identical fund. So for instance, I made sure I could buy FVALX at TIAA, waited 30 days to sell off FVALX at Scottrade. That's good. BUT if I bought more FVALX at TIAA within 30 days I still can't claim loss on my FVALX shares.
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