Re: Wash Sale / Sale to Related Party: replacement shares

#2 04-07-2004, 08:11 AM

[snip]

- quote -

> > What about later selling them in the IRA and buying them in
> > the taxable account; would those shares continue to be
> > replacement shares of the original purchase? What does that
> > do to their cost basis (the IRA might hold them while they
> > go down, up a little but below original purchase price, or
> > up above original purchase price)?

ed wrote:

- quote -

> There's no way to adjust basis in an IRA for this as an IRA
> doesn't recognize wash sale rules. YOu can't have a wash
> sale or adjust basis in an IRA. Ed

I think an important point was made by both of you:
replacement share is not the same as 'identical ticker
symbol' as a tax concept.

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#1 04-05-2004, 10:07 PM

sethb[at]panix.com (Seth Breidbart) wrote:
- quote -

> Herb Smith <smithff33[at]aol.com> wrote:
> > "Vernon V Chatman III" <vvc[at]besttaxplace.com> wrote:

> > The other is that this IS a wash sale, or more correctly, a
> > related party sale.

> But the shares were not sold to, or bought from, a related
> party; the purchase and sale merely happened close together
> in time.

It doesn't have to be a direct sale, Read the rules.

- quote -

> > That would make the loss non-realizable.
> > You are the owner of the IRA, thus purchasing shares of the
> > same stock within the IRA is a purchase of REPLACEMENT
> > SHARES.
> > > End result is that
> > 1 - The loss cannot be taken
> > 2 - The loss can never be taken
> > 3 - The replacement shares (in the IRA) will not get
> > capital gains treatment when sold, only ordinary
> > income on withdrawal

> What about later selling them in the IRA and buying them in
> the taxable account; would those shares continue to be
> replacement shares of the original purchase? What does that
> do to their cost basis (the IRA might hold them while they
> go down, up a little but below original purchase price, or
> up above original purchase price)?

There's no way to adjust basis in an IRA for this as an IRA
doesn't recognize wash sale rules. YOu can't have a wash
sale or adjust basis in an IRA. Ed

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04-02-2004, 10:59 PM

Herb Smith <smithff33[at]aol.com> wrote:
- quote -

> "Vernon V Chatman III" <vvc[at]besttaxplace.com> wrote:

> > {a} Stock sale (ticker XXX) is in a taxable account,
> > {b} purchase of stock [ticker XXX] in a traditional IRA on
> > day of sale after sell order given, and
> > {c} let's say the number of shares sold is the same as the
> > number purchased BUT all the shares sold were held long term
> > at time of sale.

> The other is that this IS a wash sale, or more correctly, a
> related party sale.

But the shares were not sold to, or bought from, a related
party; the purchase and sale merely happened close together
in time.

- quote -

> That would make the loss non-realizable.
> You are the owner of the IRA, thus purchasing shares of the
> same stock within the IRA is a purchase of REPLACEMENT
> SHARES.
> End result is that
> 1 - The loss cannot be taken
> 2 - The loss can never be taken
> 3 - The replacement shares (in the IRA) will not get
> capital gains treatment when sold, only ordinary
> income on withdrawal

What about later selling them in the IRA and buying them in
the taxable account; would those shares continue to be
replacement shares of the original purchase? What does that
do to their cost basis (the IRA might hold them while they
go down, up a little but below original purchase price, or
up above original purchase price)?

Seth

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#-1 04-01-2004, 11:53 AM

"Vernon V Chatman III" <vvc[at]besttaxplace.com> wrote:

- quote -

> Consider the following:
> {a} Stock sale (ticker XXX) is in a taxable account,
> {b} purchase of stock [ticker XXX] in a traditional IRA on
> day of sale after sell order given, and
> {c} let's say the number of shares sold is the same as the
> number purchased BUT all the shares sold were held long term
> at time of sale.
> I believe the new shares are NOT replacement shares because
> of the nature of new share's tax basis (no possibility of
> LTCG and no possibility of claiming a tax loss, in the
> future, on sale of the new shares).
> [Note: Did not sell shares TO the IRA (funds from sale
> provided to IRA, not the shares; and/or used funds already
> in IRA for purchase of shares).]
> Consequently, loss on sale can be taken.

This scenario has been discussed extensively on various tax
message boards over the past several years. The IRS has
provided no guidance in this area, leading to two schools of
thought on the matter. Your scenario is one.

The other is that this IS a wash sale, or more correctly, a
related party sale. That would make the loss non-realizable.
You are the owner of the IRA, thus purchasing shares of the
same stock within the IRA is a purchase of REPLACEMENT
SHARES.

End result is that
1 - The loss cannot be taken
2 - The loss can never be taken
3 - The replacement shares (in the IRA) will not get
capital gains treatment when sold, only ordinary
income on withdrawal

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