Wash Sale

Submitted by Mel Langer on Mon, 2020-11-02 22:23

I’m aware of the “wash sale rule” when it comes to non qualified accounts. If you owned shares of a mutual fund in a traditional IRA, and sold those shares at a loss, are you still prohibited from re-purchasing the same shares, in the same traditional IRA before 30 days are up? I mean, there’s no such thing as a “tax loss”, or even “tax basis” in a traditional IRA, so you’re not getting any “tax benefit”. My belief is that the wash sale would NOT APPLY to the exact illustration I detailed here.

Am I right? Thanks.



Submitted by Alan - IRA critic on Mon, 2020-11-02 23:41

Yes, you are correct. Similarly, there also is no wash sale if you sell in your IRA and repurchase in your taxable brokerage account.

Submitted by Mel Langer on Wed, 2020-11-04 00:36

Thank you. Just for my edification though. Different scenario. If I were to SELL the mutual fund shares in a TAXABLE account at a LOSS, then I would have to wait 30 days before purchasing shares in the same company in my IRA account. Otherwise it’s my understanding, that I couldn’t claim a tax loss . Is that correct?

Submitted by Alan - IRA critic on Wed, 2020-11-04 14:19

Yes, either 30 days before, same day, or 30 days after would produce a wash sale. And a wash sale involving an IRA is more costly than taxable accounts only because your current unclaimed loss will not result in a higher basis for the shares purchased in your IRA.

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