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Are Trust investments considered for a wash sale?

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  • Are Trust investments considered for a wash sale?

    I am trustee for an irrevocable trust for my mother with dementia. The trust was created as part of medicaid planning for her. I and my brother are the beneficiaries of the trust (upon her death), and during her lifetime, she is only entitled to the income generated by the Trust (ie, dividends, etc). The Trust is held through Vanguard, and I can manage investments through logging on to my own Vanguard portal.

    If the Trust has VTSAX in it, and I also have VTSAX (or VTI) in my own personal accounts, if I try to tax loss harvest the VTSAX/VTI, if the same fund in this Trust has a reinvestment or purchase, would that result in a wash sale for me and my personal accounts? I've been debating whether to try and change all VTI/VTSAX in my non-taxable accounts to be able to harvest any VTI losses, but would that need to include this Trust account too?

  • #2
    Doesnt the trust have its own tax payer ID (TIN)? If so, I cant see how investments for the trust are considered yours for wash sale purposes.

    Fair warning- I'm not a lawyer, nor an accountant.

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    • #3
      The answer is No. An Irrevocable Trust is a separate entity. But the trust can have a wash sale inside the trust.
      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        The Trust does not have its own EIN. I can't recall the details why (though discussed this in depth with the attorney when Trust created > 1 year ago), but the Trust is under my mother's SS#, and she is responsible for taxes on it.

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        • #5
          Originally posted by jfoxcpacfp View Post
          The answer is No. An Irrevocable Trust is a separate entity. But the trust can have a wash sale inside the trust.
          What if it is an intentionally defective grantor trust (that passes through income and presumably losses to the grantor)?
          Helping those who wear the white coat get a fair shake on Wall Street since 2011

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          • #6
            Originally posted by The White Coat Investor View Post

            What if it is an intentionally defective grantor trust (that passes through income and presumably losses to the grantor)?
            It’s still under her SSN, and the accounts are her trust, so it shouldn’t generate a wash sale for him in his personal accounts.

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            • #7
              Originally posted by The White Coat Investor View Post

              What if it is an intentionally defective grantor trust (that passes through income and presumably losses to the grantor)?
              I sway toward Larry’s answer, but, tbh, that is way above my pay grade in this forum and, w/o serious research and discussion with appropriate legal counsel, I might give the wrong advice and lead you astray. At which point, seppuku might be the only way out, Dear Leader. (apologies for cross-cultural references)

              However, my off-the-cuff, unofficial response is that it wouldn’t matter. Still 2 separate entities with separate IDNs.
              Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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              • #8
                Originally posted by Larry Ragman View Post

                It’s still under her SSN, and the accounts are her trust, so it shouldn’t generate a wash sale for him in his personal accounts.
                I was talking more generally. For example, in our IDGT we have a separate EIN, but we pay the taxes on any income in it on our personal return. Losses should pass through to us, no? Seems a little sketch to sell at a loss outside the trust and buy in the trust at the same time. Not really an issue though, since really all the taxable assets are going in the trust anyway.
                Helping those who wear the white coat get a fair shake on Wall Street since 2011

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                • #9
                  Originally posted by The White Coat Investor View Post

                  I was talking more generally. For example, in our IDGT we have a separate EIN, but we pay the taxes on any income in it on our personal return. Losses should pass through to us, no? Seems a little sketch to sell at a loss outside the trust and buy in the trust at the same time. Not really an issue though, since really all the taxable assets are going in the trust anyway.
                  Ah, I was definitely responding to the specific circumstances of the OP. I actually think the answer is different when the frame of reference is your taxable investments versus a trust you control. As you know, I am no expert, but my read of section 267 is that it prohibits deductions based on related party transactions, which would include trusts that you control. https://www.law.cornell.edu/uscode/s...7----000-.html

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                  • #10
                    Originally posted by Larry Ragman View Post
                    Ah, I was definitely responding to the specific circumstances of the OP. I actually think the answer is different when the frame of reference is your taxable investments versus a trust you control. As you know, I am no expert, but my read of section 267 is that it prohibits deductions based on related party transactions, which would include trusts that you control. https://www.law.cornell.edu/uscode/s...7----000-.html
                    That's what I would expect.
                    Helping those who wear the white coat get a fair shake on Wall Street since 2011

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