disallowed losses II
I am just curious. Before the 2008 rev ruling that specifically stated wash sales rules applied what was the rule then?
Example .. It’s 2005 and rev ruling has not been issued. Mr Smith sells xyz in taxable account at a loss and buys next day xyx in his ira. He claims the loss. He gets audited by Mr Straight By the Book IRS agent.
Does Agent let him keep loss?
Permalink Submitted by Bruce Steiner on Tue, 2008-11-25 03:27
Different tax lawyers had different views as to the correct tax treatment.
Permalink Submitted by Alan Spross on Tue, 2008-11-25 04:04
The current ruling is much more severe than a wash sale, which simply defers the date for realizing the loss until the replacement shares are sold. With the rule applying to the IRA, the loss is permanently forfeited because there is no permissible added basis to the IRA under which the loss will ever be recovered.
Perhaps the IRS was forced into this ruling by the popularity of this practice that led to open debate regarding the status relative to the wash sale rule.