WASH SALE RULE: Not For Cryptocurrency?

By Staff Reporters

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DEFINITION

The wash-sale rule prohibits selling an investment for a loss and replacing it with the same or a “substantially identical” investment 30 days before or after the sale. If you do have a wash sale, the IRS will not allow you to write off the investment loss which could make your taxes for the year higher than you hoped.

CITE: https://www.r2library.com/Resource/Title/082610254

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Don’t get soaked by the wash sale

Even if you sell at a loss from a brokerage account or IRA, it still might not want to permanently exit a portfolio position. It may want to get back into an investment now at a cheaper cost with room to re-grow.

BUT – Just wait a moment, according to the IRS “wash-sale” rule.

The IRS will not count a capital loss if, within 30 days before the sale or within 30 days afterwards, the taxpayer is also buying or acquiring a “substantially identical” investment. The rule applies to investments like stocks, bonds, mutual funds, exchange traded funds and options – but not cryptocurrency.

The basic trick is just keeping track of the days. Another skill is considering what counts as “substantially identical” for the fast-moving investor who sees a buying opportunity either 30 days before or after the day of sale.

An investor could sell a stock and buy an exchange traded fund or mutual fund that contains the stock and not run afoul of the rule, Going the other way, from a mutual fund or ETF containing a stock to a direct stock purchase, also will not trigger the rule, he noted.

EXAMPLE: Suppose an investor has several investment accounts — perhaps one is a long-term account and the other is more for short-term trades. The rule applies across the account. So if one sells and the other buys within 30 days before or after, the wash-sale rule will scrap the capital loss.

Buying and selling shares of two different funds tracking the same index within the 30-day period could also cause the wash sale rule to kick in. However, a move like selling a piece of an ETF tracking the S&P 500, and then soon buying an ETF tracking the Russell 1000 Index would be OK according to a tutorial from Charles Schwab SCHW, +3.70%. “That would preserve your tax break and keep you in the market with about the same asset allocation,” an explainer said.

But while someone’s eyeing a repurchase and letting the wash-sale window close one place, they may have a chance to start the tax strategy process in a different part of their portfolio. “There’s really tax loss harvesting opportunities across a number of different asset classes this year.”

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COMMENTS APPRECIATED

Thank You

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ORDER: https://www.routledge.com/Comprehensive-Financial-Planning-Strategies-for-Doctors-and-Advisors-Best/Marcinko-Hetico/p/book/9781482240283

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One Response

  1. Genesis, Winklevoss twins’ Gemini crypto venture, charged by SEC with selling unregistered securities

    U.S. securities regulators on Thursday charged Genesis Global Capital and crypto exchange Gemini Trust Co. with offering and selling of unregistered securities to retail investors, bypassing disclosures and other requirements aimed at protecting market participants.

    The complaint seeks the return of any “ill-gotten gains” plus interest, and any civil penalties, the SEC said. The SEC is also investigating whether other securities-law violations were committed and whether there are other companies or people relating to the alleged misconduct.

    Twins Tyler and Cameron Winklevoss are the founders of Gemini. The crypto exchange was sued late last year by investors alleging that the company sold interest-bearing accounts without registering them as securities, also through the Gemini Earn program.

    Lisa

    Like

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