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Subject:  Re: "Intent" on constructive sale Date:  11/10/1999  6:17 PM
Author:  TMFTaxes Number:  20865 of 127613

<<And, not only that, even trading in an IRA account may cause you problems with both the constructive sale rules AND the wash sale rules. At least in my opinion...and the opinion of may other tax pros.

I'd be interested to hear more about this. Since IRA's are technically held by a custodian and not the taxpayer, at first blush I don't see how this would apply. Do you have a reference to point me to? I'm back into the tax biz after a couple years absence and it looks like I missed out on a couple of recent developments. >>

There is no definite ruling. But the IRS would make the claim on TWO major points:

1. The control issue. The courts have previously ruled that if you have control of an account (such as trading in your IRA...deciding which stocks to buy and sell), that account actually becomes yours when dealing with various interrelated tax issues (such as the wash sale and constructive sale rules).

2. The related party issue. Going along the same lines, the courts have said that an account over which you have dominion could be treated as a "related party" under the various IRS related party rules (again for wash sale, constructive sale, and other purposes).

If you would like some additional information, please let me know. I'll be happy to lead you to various court cases and other rulings that you can look up.

Is this a "black and white" issue. Certainly not. But if pushed against the wall, I personally believe that the IRS could make a very valid and compelling case under either (or both) of the two heading noted above. So most of the tax pros that I know have just decided not to spit in Superman's face. They don't want a potentially large (if the dollars are large enough) professional liability case.

Let me know if you want additional references. I'll be glad to give 'em to you.

TMF Taxes
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