The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: IRS opinion of Wash sales: taxable and IRA||Date: 12/7/1999 10:54 PM|
|Author: ptsurmr||Number: 22488 of 123155|
On 11/24/99 I posed a question to this board (post 21679: http://boards.fool.com/Message.asp?id=1040014006532000&sort=id ) regarding selling a stock in a taxable account for a loss and immediately buying it back in an IRA. Doing so might have some nice advantages:
1) Can take loss on tax return to offset gains and/or earned income
2) Buying back in IRA will preserve your position in the stock (nice if you believe the stock is undergoing a temporary downturn but is soon to rise)
3) After 30 days, you can sell the stock in your IRA and buy back in your taxable account at a perhaps higher cost basis.
In essence, you use this technique to offset some of the stock downturn while still maintaining your position in the stock.
Much good discussion resulted in the follow-up posts to this original thread, and I thank those kind enough to share their opinion. I took the opportunity to email the IRS with the same question. Today I received their response. Below is the response I received directly from an IRS employee (I have removed the employee's name and employee ID, which was provided in the original message). If (BIG if) I understand this correctly, it sounds like what I propose is doable. I would appreciate hearing your thoughts on this matter...
Date: Tue, 7 Dec 1999 20:05:32 -0600
Subject: IRS Email Tax Law Assistance
NOTE: Our response to your tax law question appears below. If you have additional questions on this or other general tax law topics, please return to our web site at: (http://www.irs.ustreas.gov/prod/help/newmail/user.html to submit it. Please do not use your "reply" button to send a follow-up question.
Thank you for your inquiry regarding wash sales on stocks. The confusion you may