The Motley Fool Discussion Boards
Financial Planning / Tax Strategies
|Subject: Re: Wash Sales & IRA Accounts||Date: 7/28/2000 12:20 PM|
|Author: JAFO31||Number: 38138 of 121180|
kmmodlish: "First of all, I know no one that will claim to have all the answers to this question. Even the IRS would come to different conclusions within their own organization.
But, if the IRS claimed this example to be a wash sale, when then, would they claim that the original loss could be claimed? And on what shares? The loss will NEVER be realized within the IRA account regardless of when that stock is sold. So it goes back to the original loss. There is no provision in the wash rules to allow a loss on an "original" wash sale to fall back to these original shares. It either wasn't a wash sale to begin with (which is what I claim), or the loss never gets taken (which is absurd)."
Bob78164: "If the IRS concludes that the transaction is a wash sale, then as you note, the loss would be lost forever. That's why the risk is so high. Characterizing the result as absurd seems to me an awfully thin reed on which to hang your hat. Even if I agreed that the result is absurd (and upon reflection, although the result is certainly harsh, I wouldn't call it absurd), it's not as though there aren't other provisions of the Code that compel absurd results. --Bob"
I agree with the last two sentences of Bob's post. I admit that I have done no research on this topic, but why can the basis not be transferred to the IRA (if it is a regular IRA)? It is clear that after-tax contributions to a regular IRA by those not eligible to deduct the contribution create basis in the IRA, and no additional FIT is due on those dollars that were taxed going into the regular IRA. Admittedly, this idea/theory does not fit well with the idea that the gain is recognized when the "washed" shares are sold, but it is not inconsistent with general theory regarding either wash sales or regular IRAs.
I am aware that this idea/theory would not work WRT a Roth IRA, but the IRC has had (and will continue to have) inconsistencies and oddities.
Just my $0.02. Regards, JAFO
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