Inherited IRA & Wash-Sale Rules

Submitted by Rob Layman on Tue, 2020-01-07 15:43

I understand the IRS ruling that does not allow one to buy an identical stock in an IRA account after taking a loss in a non-retirement account. My question is: does this apply to Inherited IRA’s too? (In other words, Is an Inherited IRA considered a “Non-Retirement Account” , or, is it considered as an IRA account for wash-sale rule purposes here?
Example: If I sell a stock at a loss in my Inherited IRA account, can I immediately buy it in another IRA account, or a regular brokerage account I own without triggering a wash-sale?



Submitted by Alan - IRA critic on Tue, 2020-01-07 16:06

To claim a loss, the sale must be in a taxable account, but the wash sale rules prevent you from buying a substantially equal security in your IRA, whether owned or inherited. However, you could purchase such a replacement security in your 401k, since the ruling only applied to IRA accounts. 

Submitted by Rob Layman on Tue, 2020-01-07 16:22

I fully understand your reply.  thanks, – However, I could swear I read somewhere that the IRS eventually ruled that Inherited IRAs where NOT considered as IRAs for the purpose of wash-sale rules (??)  You are not aware of anything along this line?  I simply want to make sure that I can sell stocks for a loss within my Inherited IRAs, and then buy them back immediatly in the same (or other) account without triggering a wash-sale transaction.   rsvp & thanks again. 

Submitted by Alan - IRA critic on Tue, 2020-01-07 17:39

  • RR 2008-5 refers to IRAs and Roth IRAs under Sec 408 or 408A, which includes inherited IRAs. Therefore, an inherited IRA is treated the same as an owned IRA with respect to wash sales. The RR is posted below.
  • https://www.irs.gov/pub/irs-drop/rr-08-05.pdf
  • The wash sale is created by selling in your taxable account and buying in your IRA or inherited IRA. A sale in an IRA does not trigger a wash sale because you cannot claim a capital loss in an IRA. Individual securities do not have any cost basis in an IRA. Therefore, you can buy and sell securities in your IRAs without any wash sale implications. What you cannot do is sell in taxable, take a cap loss, and then buy back in an IRA or any type. If you do, you cannot take the cap loss, and you do not get any basis in your IRA as a result.

Submitted by Rob Layman on Wed, 2020-01-08 12:13

Got it.  Many thanks for the info and clarification.

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