I thought that I had posted this yesterday but I never saw it on the message board.My wife inherited about $2000 worth of stock when her father died in 1978. The stock is now worth over $12000.We were thinking of selling it and putting the entire amount back into four new stocks.Does this count as a wash sale since we are simply re-investing the entire amount? Or, would we be subject to a 20% capital gains on the $10000 increase in the investment?I think that we'd have to pay capital gains, but it never hurts to ask.Thanks.-TinyTone
<<My wife inherited about $2000 worth of stock when her father died in 1978.>>I am assuming that $2000 was the Fair Market Value (FMV) of the stock at the time she inherited the stock. Usually, one's tax cost on inherited property is FMV at time of death. <<The stock is now worth over $12000.>>About 9.3% annual return. OK, but not great.<<We were thinking of selling it and putting the entire amount back into four new stocks. Does this count as a wash sale since we are simply re-investing the entire amount? Or, would we be subject to a 20% capital gains on the $10000 increase in the investment?>>Wash sales only occur when you sell stock and buy back "substantially identical" stock or securities within 30 days. Usually "substantially identical" means the same stock (or shorting the same stock, or options on the stock, or something of that nature) Since you say you want to purchase "4 new stocks", I highly doubt that the wash sale rules apply. So it would be a normal sale, and you've held a little longer than 18 months so the 20% rate applies (10% if you're only in the 15% tax bracket)<<I think that we'd have to pay capital gains, but it never hurts to ask.>>Right on both counts. I'd also suggest (if you haven't done it already) to check out the Tax FAQ from the Fool home page, which has lots of useful information on a variety of tax issues (wash sales included).Hope that helps,-synchronicity
>> Wash sales occur.... <<I skipped all previous entries in this thread but just wanted to clarify one thing from synchronicity's most recent reply.In addition to it NOT being a wash sale because the securities were not identical, it is also NOT a wash sale because the SALE WAS AT A PROFIT.Wash-sales rules apply only to 'capital losses'. They are set up so that you can not 'claim a loss' if you still own the stock (at the new lower cost basis) because you rebought the shares you sold within +/- 30 days of the sale.If you make money (cap gain) on a stock sale, then even if you buy back the exact same stock you still have to declare the gain. there ain't no "wash sale" on gains.Sorry for the excessive clarification... which I hope was a clarification.-DD
<<just wanted to clarify one thing...In addition to it NOT being a wash sale because the securities were not identical, it is also NOT a wash sale because the SALE WAS AT A PROFIT....there ain't no "wash sale" on gains.>>Thanks for the clarification. My bad, should have mentioned that. I'm still burnt out from tax season. And I keep thinking of bad jokes involving "wash sales" and "money laundering".-synchronicity
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