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Author: stockmover Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120806  
Subject: Wash Sale Losses Date: 9/23/2001 6:56 PM
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I know that you cannot take a tax deduction for a stock loss if the same stock was purchased within 30 days of the sale. Does this also apply if the stock was sold within a taxable brokerage account but repurchased within an IRA Account?

Thanks
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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54181 of 120806
Subject: Re: Wash Sale Losses Date: 9/24/2001 3:45 AM
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I know that you cannot take a tax deduction for a stock loss if the same stock was purchased within 30 days of the sale. Does this also apply if the stock was sold within a taxable brokerage account but repurchased within an IRA Account?

Short answer: we don't know for certain.

Long answer: Type "wash sale IRA" into the search box, grab a cup of java (or joe - your choice), and read the accumulated discussions. Many of the posts will be from 1999 and 2000. They are still relevant, as no further guidance has been issued AFAIK.

--Peter

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Author: tacful One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54192 of 120806
Subject: Re: Wash Sale Losses Date: 9/24/2001 10:22 PM
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To fund any IRA one must have earned income. You must fund your IRA with cash only, presumably from earnings. You are purchasing whatever is in your IRA (be it stocks, bonds, gold, or CDs) with cash from earnings, NOT from the sale of investments.

Buying a stock within your IRA and selling an identical stock in a taxable account within 30 days has no bearing on the tax treatment of the sale. IRAs & taxable accounts are like apples & oranges. Wash sale rules pertain to buying & selling in taxable accounts only, not IRAs.

Regards,
Tom

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Author: lorenzo2 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54194 of 120806
Subject: Re: Wash Sale Losses Date: 9/24/2001 11:36 PM
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To fund any IRA one must have earned income. You must fund your IRA with cash only, presumably from earnings. You are purchasing whatever is in your IRA (be it stocks, bonds, gold, or CDs) with cash from earnings, NOT from the sale of investments.

It's certainly true that the original source of funds in an IRA must be earned income, but it's absurd of you to say that you can't buy things within an IRA with the proceeds from the sale of an investment. If you have a brokerage account as a self-directed IRA, you can buy and sell (within the IRA) as much as you want. In particular, you can sell one stock and buy another with the proceeds...

Buying a stock within your IRA and selling an identical stock in a taxable account within 30 days has no bearing on the tax treatment of the sale. IRAs & taxable accounts are like apples & oranges. Wash sale rules pertain to buying & selling in taxable accounts only, not IRAs.

This is quite misleading; ptheland is correct when he says that we just don't know for certain. There apparently have not been any IRS rulings that bear directly on this issue, but neither is it clear that you can't run afoul of wash sale rules with, say, a sale in a taxable account and a purchase (within the wash period) in an IRA. See, for example, the discussion at:

http://www.fairmark.com/capgain/related.htm

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Author: acm4tax Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54196 of 120806
Subject: Re: Wash Sale Losses Date: 9/25/2001 12:14 AM
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I had this same question when I worked on Quicken.com. I wrote to IRS and got a written answer which I'll try to dig up and post here.

Investing in a stock you sell at a loss in a taxable account within 30 days does NOT create a wash sale if you repurchase the same stock within your IRA, was the answer we got. I'll see if I can find the letter.

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54203 of 120806
Subject: Re: Wash Sale Losses Date: 9/25/2001 2:39 AM
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I had this same question when I worked on Quicken.com. I wrote to IRS and got a written answer which I'll try to dig up and post here.

Investing in a stock you sell at a loss in a taxable account within 30 days does NOT create a wash sale if you repurchase the same stock within your IRA, was the answer we got. I'll see if I can find the letter.


I'm sure you're well aware that such written advice is not binding on the IRS. If it were a PLR (which I'm fairly sure it wasn't, as a PLR would have been widely circulated) it is binding only for the taxpayer to which it was issued. The best such a letter would do is get you out of any penalties, but not tax, if a court disagrees. Of course, its also possible that a court would agree with the letter, but they are certainly free to use their own judgement.

--Peter

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54207 of 120806
Subject: Re: Wash Sale Losses Date: 9/25/2001 10:01 AM
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I had this same question when I worked on Quicken.com. I wrote to IRS and got a
written answer which I'll try to dig up and post here.

Investing in a stock you sell at a loss in a taxable account within 30 days does NOT
create a wash sale if you repurchase the same stock within your IRA, was the
answer we got. I'll see if I can find the letter.


I have seen several such IRS replys and they all are carefully worded to not really say anything definite. They basically say you do not have a wash sale in an IRA. Unfortunately the wash sale is in the regular account and is a non-tax event in the IRA.

Why would anyone purposfully create a problem for which there is no definite answer when you can just wait 30 days for the IRA purchase. ed

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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54213 of 120806
Subject: Re: Wash Sale Losses Date: 9/25/2001 1:43 PM
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tacful: "Buying a stock within your IRA and selling an identical stock in a taxable account within 30 days has no bearing on the tax treatment of the sale. IRAs & taxable accounts are like apples & oranges. Wash sale rules pertain to buying & selling in taxable accounts only, not IRAs."

That issue is not as clear as tacful suggests. It has been discussed numerous times ont his board, and their is clearly a divided opinion among the resident.

I have even participated in the discussion (but I am not a residnet pro, more like an interested kibitizer).

Regards, JAFO

(I beleive that the search function only covers 6 months of posts these days, so the best search is probably to go back 2-3 years and collapse the threads and review by thread title)




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Author: acm4tax Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 54231 of 120806
Subject: Re: Wash Sale Losses Date: 9/26/2001 12:01 AM
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This is the post I found about a potential wash sale being deemed not so when the repurchase is in a trust account such as a 401(k), but I'm almost certain I have one that is regarding IRA's also. As was mentioned a couple of posts ago, this interpretation can be disputed by IRS in an audit. But having something in writing from IRS will prevent them from assessing penalties even though you may still have to pay the tax and interest.

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.gov/taxlaw) to submit it. Please do not use your "reply" button to send a follow-up question.


This would not be considered a wash sale because the 401k is considered a seperate entity from you personally. There is no repurchase by you and you do not own the newly purchased stock the 401k (trust) does. You would report the sale on Form 1040 Schedual D as you normally would and recognize the loss.

Sincerely,



Your Question Was:
Is this a wash sale? I had on July 1 a 401k account with $5000 in it and a regular non-tax deferred account with 100 AMZN. I sold AMZN for a loss and bought it in the 401k account on the same day. Is this a wash sale?


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