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I have a stock that I'm considering selling at a loss for tax purposes. (I've held less than a year in a taxable account.) I think the stock has potential though so I'd like to buy it again. I know I'll have to wait 30 days in my taxable account, but what about buying it in my Roth IRA? Can I buy it back immediately in that account or do I still have to wait 30 days?
Thanks in advance for any advice
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If you rebuy within 30 days after the sale day, it is a wash sale. Rebuying within a tax advantage account means that the loss can never be used as a tax deduction. Don't do it.

If you believe enough in the potential of the stock, you can buy it is the retirement account 31 days (30 days don't include the day of the sale) before you sell the stock in the taxable account.
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Thanks vkg. I like your thinking
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The other method is to own something similar but not the same.
ex. buy call options on the stock when you sell it, then sell the call options and rebuy the stock 31 days later.

Cons - probably higher cost in transaction fees
- if it goes up during the 31 days the options are in your taxable account and are short term gains.

Pros - not increasing your exposure to the stock
- if it goes down more in the 31 days, you get another loss that's claimable. :)
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Foo1bar: The other method is to own something similar but not the same.
ex. buy call options on the stock when you sell it, then sell the call options and rebuy the stock 31 days later.

WP: That example will not work. Call options are substantially equivalent to the underlying security, so you still carry the wash sale. (Now in the basis for the options) To avoid the wash sale, you must buy something not substantially equivalent.
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That example will not work. Call options are substantially equivalent to the underlying security, so you still carry the wash sale.

I agree.

However, it might be possible to sell a put and avoid wash sale treatment. Ideally, the put would be out of the money, as if it is too far in the money, it would be substantially identical and you'd still have a wash sale.

Here's a post by Kaye Thomas at Fairmark discussing the issue: http://fairmark.com/capgain/wash/wsoption.htm

--Peter
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There is a great deal of disagreement over the tax handling of options, and this applies also to the relationship between options and wash sales. For instance, when you roll an option for a loss, does that trigger wash sale rules? Or can you take the loss independent of the new position you have set up?

I imagine this year will be lots of fun as the brokerages try to categorize option trades. I expect a LOT of uncertainty and many, many legal challenges.

Bob
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There is a great deal of disagreement over the tax handling of options, and this applies also to the relationship between options and wash sales. For instance, when you roll an option for a loss, does that trigger wash sale rules? Or can you take the loss independent of the new position you have set up?

I'm not sure I understand what you mean by "rolling an option", but generally speaking, closing an option position for a loss and opening a new position where the expiration date and/or exercise price are different is sufficient to avoid triggering wash sale considerations. The key concept in wash sales is "substantially identical securities". Two securities (options) in the same company with different inherent risks are not substantially identical.

Ira
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