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tax loss selling question

edited December 2022 in Fund Discussions
I was thinking of selling PIMIX on December 30 for a tax loss. I realized too late that PIMIX made a distribution on November 30. Would selling PIMIX trigger the wash sale rule? If so would it only be for the distribution amount on November 30, or for the entire tax loss? I would buy the fund back in February. Thanks.

Comments

  • Unfortunately, 11/30/22 distribution would be WITHIN the +/- 30 day wash sale window.

    Good news is that only the distribution amount would be disqualified due to wash sale. In case of partial sale, that amount would be added to cost basis of the remainder, so basically, the wash sale defers the tax loss. If total sale, then there would be no way for the broker to adjust the cost basis and it won't be shown in 1099.
  • edited December 2022
    Hi sir Yogi
    Can you Pls do my tax lol
    My cpa charges too much 400s per hr


    I think most firm automatically calculate if you do TurboTax once everything uploaded...

    One firm 7 yrs ago they sent us a letter later stating forgot paperwork from another large firm that triggered audit so we left that firm


    Evidently lots folk saling now to pay for potential taxes 2022 including elon
  • edited December 2022
    You can still sell but this year distribution has already been added to the cost basis. Also the wash sale rule will be apply.

    Ideally, you want to sell the entire position BEFORE the record date so to avoid the year end distribution. After 30 days (wash sale rule) you can buy the same security again. Another option is to buy another security from another firm, i.e iShare ETF vs Vanguard ETF, that tracks the same index. Schwab link below provides additional information.
    https://schwab.com/learn/story/primer-on-wash-sales
  • Here's another tax-loss question: Can a tax loss be applied against the tax due from an IRA distribution or early sale?
  • edited December 2022
    Tax-loss will offset capital gains first, and then up to $3,000 of ordinary income (earned, unearned, from IRA/pension distributions, etc).
  • If your loss exceed $3,000, the remaining balance gets carry over next year.

    Back in 2008, I incurred capital loss that covered next several years. If I would be more patient, these funds would have recovered in several years. In the retrospect, I should be patient just like Warren Buffet.
  • +1 Sven I learned that with the ultra-short bond funds in 2020 !
  • Probably I'm not understanding this correctly. I have an IRA, with required distributions. Those distributions of course are taxed. Lets assume that the tax due is $1000.

    If I were to sell an asset and take a $1000 loss, would that loss offset the tax on the IRA distribution? Somehow that seems too good to be true.
  • If your taxable income after deductions was $0, and there were no other capital gains or losses, then $1,000 tax-loss will offset fully taxable $1,000 withdrawal from T-IRA.

    But if you had ordinary income from all sources, net of deductions, of $50K, then $1,000 tax loss will reduce it to $49K. It would be hard to say which part of the income (including $1,000 withdrawal from T-IRA) was offset.
  • Ah, I knew it had to be too good to work the way that I was thinking. Thanks a lot, Yogi.
  • edited December 2022
    @carew388,
    The drawdown in March 2020 was sharp and short-lived. There was considerable pressure on Powell to rescue the market. Cutting short term rate to near zero, 0,25% to be exact, while increased the quantitative easing policy (buying bullions $ of treasury and mortgage backed bonds on monthly basis). The stock market recovered within 2 -3 months and ended with a positive gain for the year. Not selling near the bottom and let things come back was the best move in that situation.
  • I (think) you're out of luck on that issue, although I could be wrong.
    Try this link, @Old_Joe https://www.investopedia.com/articles/retirement/05/012505.asp
  • Thanks everybody for your responses.
  • edited December 2022

    Unfortunately, 11/30/22 distribution would be WITHIN the +/- 30 day wash sale window.

    Good news is that only the distribution amount would be disqualified due to wash sale. In case of partial sale, that amount would be added to cost basis of the remainder, so basically, the wash sale defers the tax loss. If total sale, then there would be no way for the broker to adjust the cost basis and it won't be shown in 1099.

    In reporting the losses to the tax person, are the corresponding purchases needed for the tax person (or IRS) to determine what loss is allowed? My Schwab account will show realized losses/gains on a screen and indicates when a loss is not allowed per wash sale. Possibly my year end aggregate 1099 will show all the info required.
  • Ben
    edited December 2022
    Capital loss can be used to reduce taxable income. It does not directly reduce the tax owed on a specific source of income. After offsetting capital gains leftover capital loss can be used to reduce overall taxable income. So it indirectly reduces tax by reducing taxable income.
    Put another way:
    According to my understanding of what the IRS says, your capital loss of $1k would first offset capital gains. If capital gains were less than 1k you will have some leftover loss to work with. It does not get applied directly to any specific area of taxable income, but to taxable income added together from all sources. So if your taxable income before figuring in the capital loss was —let's make it simple — two thousand dollars and your remaining capital loss was 1 dollar, you would owe income tax on $1999 of income. It is not calculated in any way that eleven cents of that dollar got subtracted from an IRA distribution etc


    I hope this makes it clear.
    Old_Joe said:

    Probably I'm not understanding this correctly. I have an IRA, with required distributions. Those distributions of course are taxed. Lets assume that the tax due is $1000.

    If I were to sell an asset and take a $1000 loss, would that loss offset the tax on the IRA distribution? Somehow that seems too good to be true.

  • @Ben- yes sir, I had forgotten that relationship. Old age... lucky that I remember where I live. I think...
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