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Financial Planning / Tax Strategies
|Subject: Re: IRS opinion of Wash sales: taxable and IRA||Date: 12/8/1999 2:12 AM|
|Author: ptsurmr||Number: 22497 of 122521|
I hope you aren't relying on this from the IRS for anything. I think you didn't read it in respect to who wrote it. They again managed to answer a question in such a way as to completely confuse anyone reading it by bringing up 3 other conflicting but not applicable issues but not answering your question directly. I have found the IRS e-mail service a waste of time.
Well, I have mixed results with their e-mail service, but I figured what the heck... we pay for it, might as well use it! Besides, we have had quite a bit of debate on this board regarding this topic. I thought we might as well get the opinion of those in the IRS that are assigned to assist us in these matters.
I do not know what you mean by not reading it in respect to who wrote it. I agree the response is a bit confusing, that is why I posted it here... for discussion. Perhaps I can follow up to the IRS with more pointed questions and requests for clarification.
2. They didn't answer question #2 directly. They said you would "recognize the $100 loss in 1999". If you think this means to take the loss, why do they tell you to add it to the basis of the IRA stock?
Seems to me that they did answer the question pretty directly: I "would recognize a 100 short
term loss in 1999". The addition of the words "have a basis in the IRA of 200" seems a bit odd, and I appreciate your, and others, interpretation
Also, what you are describing about selling the IRA stock after 31 days and repurchasing it outside the IRA is a direct intentional sham to avoid another tax avoidance scheme the IRS intended to stop.
The IRS allows one to sell a stock and buy a similar, but not identical stock, take the loss on the original sale, and then after 30 days buy back the original. (As a matter of fact, my recent TD Waterhouse newsletter gives some recommendations for this strategy.)
For mutual funds one can sell a poor performer and buy a similar fund and take the loss. Assume you have shares in a Vanguard Index 500 fund that you bought near the end of the year. Suppose (unfortunately) these shares have dropped in value, and you want to take the loss, but preserve your position in the S&P 500. You simply sell your Vanguard shares and buy the equivalent Fidelity Index 500 fund shares, or SPY, or any other Fund's Index 500 variant.
As far as I know, the IRS does not consider these "shams". Yet they allow you to take the entire loss immediately, and not defer it. The sale of losers in my taxable account, with simultaneous repurchase of the identical security in my tax deferred account, can be viewed as a similar (similar in effect) type of event as those allowed by the IRS described above. IMHO, if this is a "sham", then so are the above cases.
Thanks for your discussion.
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