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  • Wash sale question

    Trying to learn the ins and outs of tax loss harvesting as started a taxable account last year.  I've read most don't automatically reinvest dividends in taxable to avoid wash sales but I don't understand how they trigger one. I know you can't buy/sell 30 days before or after. Just gonna use an example as easier.

    Let's say you own 100 shares of x. Dividends bye you one more share. Two weeks later you sell 100% of X and buy another fund, call it y, that follows a different index. Since you bought one share of x within 30 days of liquidating does that mean you can't harvest a loss on it?  Or does it only apply if you tried to only sell certain tax lots with specific basis in x?

    Currently I'm just switching from total international and FTSE. If one does that and is always selling 100% of their shares and never buying into the other within 30 days your never trigger a wash correct?

    Struggling to even articulate this so apologize if doesn't make sense.

  • #2
    In your example, the sale of the 1 share you bought 2 weeks ago will be a wash, no capital loss allowed for that one share.  The sale of the other 100 shares will still be a capital loss.

    I have all dividends sent from Vanguard to a checking account, and I reinvest them into 1 fund manually (by buying new shares).  I make sure I haven't sold from that 1 fund in the last 30 days, and that I won't sell for another 30 days.

    Hope that helps.  It can get pretty complicated.

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    • #3
      If you direct Vanguard to send the dividends to a separate checking account, and you then reinvest those dividends from the checking account to a separate fund (not the same funds which generated the dividends), it doesn't matter if you sell from the second fund within 30 days in terms of the wash sale rule.  You're still good re: tax loss harvesting.

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