Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
The obvious next step, of course, is to sell the stock from the taxable account and purchase it in the Roth IRA. As you will no doubt realize, this plan will realize a taxable gain if you use a winning position. If you try it with a losing position, the consensus on this board (although the law is admittedly not clear on this point) is that the wash sale rule will disallow the loss. Your best bet might be to hold the position in the IRA for at least 31 days (avoiding the wash sale rule) before selling your position in the taxable account (thereby realizing your loss).

I received the following email from the IRS (I asked the above question on their Web site):

Wash sale: A sale of stock or securities at a loss within 30 days before or after you buy or acquire in a fully taxable trade, or acquire a contract or option to buy, substantially identical stock or securities.

In other words, if the buy order isn't "fully taxable", it's not a wash sale. This means that you can sell stock at a loss in a taxable account and buy it back in a non-taxable (IRA) account and take the capital loss. This means that it's particularly good to transfer underperforming (but good) stocks from your taxable to your tax-free accounts. I moved shares of AAPL in this way, taking a small capital loss from the taxable account and building value in the tax-free Roth IRA.

You can also look at it another way. Clearly, you don't run into wash sale rules if you sell a stock in your IRA at a loss and buy it back in your regular stock account. Why should the reverse be true?
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.