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Strategies & Market Trends : IRS, Tax related strategies--Traders -- Ignore unavailable to you. Want to Upgrade?

To: mod who wrote (497)	9/17/1998 7:37:00 PM
From: Colin Cody	Respond to of 1383

Dennis, the reasoning I hear for exempting IRAs (but not Keogh Plans, for example) from the wash sale rule is legal parsing of the language. Much like the recent legal parsing of the language as to what constitutes a "sexual encounter". . As I said, I don't buy it! . Colin

To: mod who wrote (497)	9/18/1998 8:09:00 AM
From: Kaye Thomas	Read Replies (1) \| Respond to of 1383

What! You mean this is open to debate? I've always observed the wash sale rules regarding my taxable vs. IRA-SEP and Roth IRAs, even though it can be a pain sometimes. I'd be interested in what the reasoning is for not using the wash sale rules for IRAs. There's nothing in the language of the Internal Revenue Code or the regulations that would apply the wash sale rule to related party transactions. That's what you have if you sell in a taxable account and buy in an IRA, because the IRA is a separate "person," albeit a related one. Some people conclude that you don't have a wash sale if you sell in a taxable account and buy in an IRA. I hasten to add that the legal authorities strongly indicate that the wash sale rule does apply in this situation (and any other situation involving closely related parties). The IRS and the courts have interpreted it that way, although there's no interpretation directly involving an IRA. There's even a case that seems to suggest that there's a "common law" wash sale rule that can apply where the statutory wash sale rule doesn't. Furthermore, it's worth noting that there's a lot more to lose from a wash sale involving an IRA than in the usual wash sale. In the usual wash sale, you buy back stock and get a higher basis, which you can use to reduce a future gain or increase a future loss. But if you buy back in an IRA, that added basis does you no good at all. In this situation the wash sale rule produces a dead loss, so I always advise caution in dealing with the wash sale rule and IRAs (or any other account you control). Kaye Thomas, author Fairmark Press Tax Guide for Investors fairmark.com