Income Taxes and Record Keeping ( tax ) Message Board

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Strategies & Market Trends : Income Taxes and Record Keeping ( tax )

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To: Ira Player who wrote (2228)	7/2/1999 2:14:00 PM
From: Kaye Thomas	Read Replies (1) of 5810

My previous message responded to the "normal" question of loss disallowance when there's a sale in a taxable account and a purchase in an IRA. Ira Player (great name, that) raises the reverse question: if the wash sale rule applies in that situation, then you should be able to apply it in reverse, selling a loser in an IRA and buying it in a taxable account with an increased basis. One possible response of the IRS to this situation would be to say that it isn't the wash sale rule, but rather the related party sale rule that applies (see my previous message). In that case, you don't get to deduct the loss on a subsequent sale (although you can use the disallowed loss to reduce a gain if the stock recovers). In this way, the related party rule is worse than the wash sale rule. More likely though, the IRS would simply point out that IRAs never deduct losses, so the amount of the disallowed loss is zero and there's nothing to add to your basis. I find it hard to believe that a court would side with the taxpayer in an attempt to move basis from an IRA to a taxable account. Kaye Thomas, author Fairmark Press Tax Guide for Investors fairmark.com

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