The IRS just announced that if a taxpayer sells a stock at a loss in a taxable account and buys identical stock in an IRA within the 61 day period that you have a weash sale. Furthermore the IRS says there is no increase in basis of the stock in the IRA. So what happens to the disallowed loss?
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Kram-
I think that you are confusing a taxable account with a tax deferred account such as an IRA or 401k.
It is my understanding that wash sale rules only apply to taxable investment accounts.
I believe this to be the case because gains and loss are generally not recognized inside an IRA or tax deferred vehicle. The taxable situation arises when the distribution is made from the tax deferred account. Therefore while a wash sale would increase the basis in a taxable account it would have no bearing on a tax deferred account.
Of course this is if I understood your original post, I have known to be wrong before, maybe someone else can chime in. -
brand new
This wash sale issue just came out from IRS in the last two weeks.Comment
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I think I found what you are looking at.
It sounds like if an individual sells a security in a taxable account for a loss but purchases the same stock or fund back within the time frame within there IRA or other like account that you must apply the wash sale rules to the sale in the taxable account and can not increase the basis in the stock/fund.
I guess the IRS chief counsel memo addressed this issue recently. Is this what you were referring to?Comment
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Yes, what happens is the loss evaporates and is gone. This strategy has been promoted in the past as a way to take losses on a stock you still want to hold, but avoid the wash sales rules. So they are closing a loophole.Comment
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