Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
Hi All,

I've checked the FAQ's but am still a little confused regarding my situation. I "sold"(actually redeemed) shares of a bond fund in 2006 and am not sure if the Wash Sales Rules apply to me.

According to the instructions I receive on TurboTax, the rules apply to me if I "bought or reinvested dividends in substantially identical securities between June 10, 2006 and July 9 2006" and I "held these securities (did not sell them as part of this sale)".

I should point out that I used money from this bond fund to pay for a new roof and to transfer them to my personal bank account. Any help would be appreciated. Thanks.

Dodgeball
Print the post Back To Top
No. of Recommendations: 0
Did you sell all the shares in the bond fund at that time? And not purchase any again within 30 days?

If so, then you may have bought some within 30 days ahead of time, but you did not hold them (i.e. you sold those shares too). So you do not have a wash sale.


If, on the other hand, you only sold part of the bond fund shares, then, on a FIFO basis, you did not sell any of the shares that you recently had picked up, or picked up shortly thereafter. So, in that case any number of shares that you bought within 30 days of that sale... that number of shares is a wash sale. Or the total number of shares remaining after you sale, if that's less.


Yes, wash sales are confusing. So I'm hoping you fall into the first category because that would certainly be simpler.
Print the post Back To Top
No. of Recommendations: 0
Wash sales are not confusing. If you sell at a loss and rebuy the same securities (in general) within 30 days before or after the sale, that rebuy is the repoacmeent shares for the wash sale.

So, to have a wash sale you must sell at a loss, and repurchase the same stuff within 30 days befor or after. Until those things happen, don't sweat all the details that ensue.

ed
Print the post Back To Top
No. of Recommendations: 0
I should point out that I used money from this bond fund to pay for a new roof and to transfer them to my personal bank account. Any help would be appreciated. Thanks.

First assumption is that the sale resulted in a loss. No wash sale exists for profitable sales.

What you did with the specific funds is irrelavant. I am assuming you sold only part of the shares. If you sold all of the shares and didn't rebuy, there is no wash sale. What matters is if any account, you bought shares within 30 days before or after.

If you were reinvesting dividends, then it is likely that you bought shares within the 30 day window. The timing has to be perfect for reinvestment purchases to be within the 30 day window before and after.

Debra
Print the post Back To Top
No. of Recommendations: 0
I am assuming you sold only part of the shares. If you sold all of the shares and didn't rebuy, there is no wash sale.

There is no difference whether he sold all the shares or part of them--What matters is if any account, you bought shares within 30 days before or after.

That's correct.

If you were reinvesting dividends, then it is likely that you bought shares within the 30 day window. The timing has to be perfect for reinvestment purchases to be within the 30 day window before and after.

He didn't say anything about reinvesting, let alone dividends from a Bond Fund?? He quoted in his first post all he needed to know: that he had no wash sale--he reinvested in a roof, not the same bond fund.

ed
Print the post Back To Top
No. of Recommendations: 1
There is no difference whether he sold all the shares or part of them--What matters is if any account, you bought shares within 30 days before or after.

Sorry, edco, not true. If he sold all the shares, then he can't have a wash. Remember the result of a wash sale is that the unclaimable loss is added back to the basis of the remaining shares. How could that be if there are no remaining sales?

But that's a practical argument. If you look up the definition of a wash sale, its that you bought shares (within 30 days) that you *did not sell* as part of the sale (as the OP quoted). If you sold them all, they you obvoiusly sold those.


He didn't say anything about reinvesting, let alone dividends from a Bond Fund??

Bond funds absolutely do pay dividends, they're just not qualified dividends. Unless you want to be the one to tell Vanguard that the 1099-DIV I got for my bond funds with the total amount in box 1a (but none in box 1b) is wrong.

Second, we were talking about reinvesting dividends regularly, such that your monthly payout goes back to buy more shares of the fund. While not universal, this is typical. Therefore, if you had 1000 shares of a fund, and were getting 10 more share ever month, and in the middle of March, you sold 500 of those shares. Then your Feb 28th and March 31st dividend reinvestment would be buying shares within 30 days of your sale. So those number of shares would be a wash sale.


So:
1) If the OP sold the shares for a loss
and
2) The OP was reinvesting dividends (or otherwise bought shares within 30 days)
and
3) The OP did not sell all the shares of the fund

Then the OP has a wash sale on the number of shares which is the lesser of:
1) The number of shares bought within 30 days
or
2) the number of shares remaining in the fund after the sale
Print the post Back To Top
No. of Recommendations: 0
He didn't say anything about reinvesting, let alone dividends from a Bond Fund?? He quoted in his first post all he needed to know: that he had no wash sale--he reinvested in a roof, not the same bond fund.

ed


Vanguard calls the monthly distributions from their bond funds dividends. They are not qualified dividends, but the distributions are dividends. It is not unusual to have reinvestment set as an option for mutual or bond fund distributions.

The point I was trying to make was that what he did with the specific funds is irrelavant. He could have rebought with different funds and still generated a wash sale.

Debra
Print the post Back To Top
No. of Recommendations: 0
Sorry, Debra, you should take a primer course in Wash Sales.

If he sold all the shares, then he can't have a wash. Remember the result of a wash sale is that the unclaimable loss is added back to the basis of the remaining shares. How could that be if there are no remaining sales?


Because the unclaimable loss is added back to the basis of the REPLACEMENT shares, and the part of a lot that isn't sold can't be the replacement shares for the part that was sold because they were'nt purchased to replace the sold shares, they're just shares not sold.

If you look up the definition of a wash sale, its that you bought shares (within 30 days) that you *did not sell* as part of the sale (as the OP quoted)

Again, they have to be an independent purchase to be shares you bought that you didn't sell, not the shares of the lot you bought that became the wash sale that you didn't sell.

As for the reinvesting, your comments were OT and just muddied the field. Contrary to your post it's difficult for the reinvested shares to NOT be reaplacement shares when they come every month. However, that's a minor problem as the reinivested shares are a very small fraction of the sold lot, and he didnt mention that as his problem..

ed
Print the post Back To Top
No. of Recommendations: 0
edco... first, my name isn't Debra :)

Second, we seem to be speaking a different language. I agree that its difficult for reinvested shares not to be replacement shares. That was exactly my point! So how did you say it was contrary to my post?


Because the unclaimable loss is added back to the basis of the REPLACEMENT shares

Agreed. But what if you sold the replacement shares too in that same sale? That's my point.


But really, you say 'contrary to my post' and then say something that was my point. And you call me Debra. Until I figure out where the big miscommunication is, I'm not sure we're gonna agree on this one.
Print the post Back To Top
No. of Recommendations: 0
fyi, I see now that vkg also responded. But you were quoting my text, so i figured you were responding to me.
Print the post Back To Top
No. of Recommendations: 2
Sorry, Debra, you should take a primer course in Wash Sales.

I understand wash sales. You need to get your references straight.

Debra
Print the post Back To Top
No. of Recommendations: 1
vkg Debra said: If you were reinvesting dividends, then it is likely that you bought shares within the 30 day window. The timing has to be perfect for reinvestment purchases to be within the 30 day window before and after.

The timeing would have to be perfect for monthly distributions to NOT be within the 60 day window. Your first sentence is right. I was correcting your second sentence, which I'm sure you didn't mean the way it is stated, and was probably a typo.

Correct me if I'm wrong, but Delta still seems to think (or originally thought) that the remaining shares from a single lot, after some shares from that lot were sold at a loss, would be the replacement shares to make the partial sale a wash sale. Hence, the deduction by him/her (that I was trying to correct) that it makes a difference whether the entire lot were sold, or not. If the original purchase was in 2 lots, even if at the same time (but not simply a split arbitrarily by the broker) and only one lot was sold, the other lot would be replacment shares for that sale if it was at a loss. This concept has been discussed many times on this board and others.

I agree that monthly distributions could be replacement shares making the sale a wash sale, but OP didn't mention any such thing so OT remarks regarding that shouldn't be intermixed with comments regarding the remaining shares.

So, barring automatic reinvested distributions ( which can't be Qualified Dividends if from a Bond Fund ) and the outright purchase ( or option) independent from the original purchased lot within 30 days of the sale, the OP does not have a wash sale (from the information he supplied).

And most important I am sorry I confused my referrences to other posters by trying to answer both in the same post, particularly as to gender. I have trouble responding to more than one post on this board because only one post is visiable when replying. On most other boards the entire thread remains visable so you can copy quotes from several posts and respond to each independently in the same reply. That would have prevented my erroneous referrences, for which I am, again, truly sorry. It was inadvertant, like a typo. ed
Print the post Back To Top
No. of Recommendations: 0
Dodgeball,

I hope you'll come back and give us the additional information we need to settle this and fully answer your question. Don't give up on us, please :)


If the original purchase was in 2 lots, even if at the same time (but not simply a split arbitrarily by the broker) and only one lot was sold, the other lot would be replacment shares for that sale if it was at a loss. This concept has been discussed many times on this board and others.

If I'm reading you right, this *may* be our confusion. I think when Debra and I were saying if 'all shares' were sold, we weren't talking about all shares of one lot or another. We were talking about *all shares*, so that when its done, you hold nothing of the fund at all, anywhere. I'll illustrate below.


I agree that monthly distributions could be replacement shares making the sale a wash sale, but OP didn't mention any such thing so OT remarks regarding that shouldn't be intermixed with comments regarding the remaining shares.

The OP never said anything about remaining shares either. It is absolutely on topic to ask the OP all relevant factors, which includes whether there were reinvested dividends. As well as if there were any remaining shares.

You say our comments on reinvested dividends are OT because the OP didn't mention it. But yet your comments on remaining shares aren't OT even though the OP didn't mention that either? Fact is, both are entirely relevant to answering the question.


On most other boards the entire thread remains visable so you can copy quotes from several posts and respond to each independently in the same reply.

I agree that TMF board software isn't the greatest. Don't even bring up the search feature ;). I wasn't offended or anything... it just made me wonder how closely you were reading if you got my name wrong. Then I saw that Debra responded too.


Anyway, here's the illustration I promised.

You buy 1000 shares of a fund at $10 each:
Buy 1000 @ $10 = $10,000

Then you get a monthly dividend of $50 which buys exactly 5 shares more each month, for 10 months.
Jan Buy 5 @ $10
Feb Buy 5 @ $10
Mar Buy 5 @ $10
Apr Buy 5 @ $10
...
Sep Buy 5 @ $10
Oct Buy 5 @ $10

So you now have 1000 + 10*5 = 1050 shares, for a total cost basis of $10,500.

On November 5th you sell all 1050 shares of the fund (not all of the original lot, but *all* of the fund). The share price has finally changed and is now $9.90, so you have a 10 cent loss per share, for a total loss of $105.

This is the sum total of your transactions in the fund. You do not re-enter it with 30 days after November 5th, nor ever.

So:
1) You have a loss
2) You have bought shares (end of Oct) within 30 days of your sale date (Nov 5th).
3) However, since you sold all shares, you also sold the October replacement shares.
4) Therefore, you do not have a wash sale.

If you disagree, I would ask you to describe how you feel this should be reported on a schedule D to indicate a wash sale.
Print the post Back To Top
No. of Recommendations: 0
vkg Debra said: If you were reinvesting dividends, then it is likely that you bought shares within the 30 day window. The timing has to be perfect for reinvestment purchases to be within the 30 day window before and after.

The timeing would have to be perfect for monthly distributions to NOT be within the 60 day window. Your first sentence is right. I was correcting your second sentence, which I'm sure you didn't mean the way it is stated, and was probably a typo.


I understand your interpertation of my statement.

What I was trying to say was that it is very unlikely for two reinvestment purchases to be with the 30 day window.

And most important I am sorry I confused my referrences to other posters by trying to answer both in the same post, particularly as to gender. I have trouble responding to more than one post on this board because only one post is visiable when replying. On most other boards the entire thread remains visable so you can copy quotes from several posts and respond to each independently in the same reply. That would have prevented my erroneous referrences, for which I am, again, truly sorry. It was inadvertant, like a typo. ed

Are you familiar with the "Replies to Your Posts" tab? These discussion boards are setup to handled combined replies.

Debra
Print the post Back To Top
No. of Recommendations: 0
Are you familiar with the "Replies to Your Posts" tab? These discussion boards are setup to handled combined replies.

No, I am not . Please explain. How do I copy text from a post, paste it to my post as a reply ( I can do this), and then go to another post to copy something from it to paste to my post to make another reply in the same post? ed
Print the post Back To Top
No. of Recommendations: 1
How do I copy text from a post, paste it to my post as a reply ( I can do this), and then go to another post to copy something from it to paste to my post to make another reply in the same post?

Maybe someone else has another method, but what I do is open another browser window and go to the second post in that window where I can copy and then paste into my reply without losing the TMF reply to box.

HTH,

Carol
Print the post Back To Top
No. of Recommendations: 0
(Carol:)Maybe someone else has another method, but what I do is open another browser window and go to the second post in that window where I can copy and then paste into my reply without losing the TMF reply to box.
______________________________________
OR, as a variation, with IE-7 you can open a 2nd tab, and do the same thing.

Bill
Print the post Back To Top
No. of Recommendations: 0
OR, as a variation, with IE-7

Bill, I'm running an 8½ year old computer with Win 98 and haven't had the guts to go from IE 6 to IE 7.

I may get wild this year and go for a new computer once Vista has a chance to get shaken out.

Carol
Print the post Back To Top
No. of Recommendations: 0
No, I am not . Please explain. How do I copy text from a post, paste it to my post as a reply ( I can do this), and then go to another post to copy something from it to paste to my post to make another reply in the same post? ed

First, let me get my foot out of my mouth. You are correct, it is common to have two reinvestments within the 30 day window, one before and one after the sale. It is theorically possible for three to be within the 30 day window, but selling on March 1st maybe the only day that is possible.

The Replies to Your Posts tab under Discussion Boards/Favorites & Replies complicates combining multiple replies in the same post. As you stated, these discussion boards are not structured to support combining replies. Replies to your most recent posts are listed under the "Replies to Your Posts" tab. A reply is only shown for the owner of the message that receives the reply.

Debra
Print the post Back To Top