In article <ggn8nu$hvh$1[at]aioe.org> , Mark Freeland <nNeEwTs[at]nyc.rr.com> wrote:
- quote -



Almost. Once you select averaging to determine basis, you ocntinue with
averaging. However, you are not frozen into Type I or Type II and can
switch, say, from Type II to Type I





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No cite, just trying to conform to the code. If you are out of that
fund with no wash sale involvement, that is you did not create a wash
sale through purchase of replacement shares for stock sold at a loss, you
should be OK. If those replacement shares are in an IRA, there is
no relief available to you, so you should be able to purchase other shares
of the fund anytime and switch from averaging to specific identification
(and FIFO is the default method of specific identification) unless the
replacement shares in a regular accunt would create a wash sale.



- quote -




No. Nor will you get wash sale relief.




- quote -

The ruling affirmed that selling at a loss in a regular account
and repurchase within +/- 30 days in an IRA creates a wash sale. I would
not worry about that speific wash sale preventing you from changing
the method of basis calculation since that wash sale cannot be fixed.
--


ArtKamlet at a o l dot c o m Columbus OH K2PZH

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According to Pub 564, once one selects an average basis method for a
particular fund, one must continue using that method until the IRS gives its
approval to change it. Most everyone believes that if one liquidates all
positions in a given fund (possibly in multiple accounts), then one can
start over with whatever method one chooses when one starts a new investment
in that fund.

1. Any citation for that rule? A quick search, at least, didn't turn up a
source.

2. Does one have to liquidate IRA accounts as well? One might think not,
but early this year the IRS put out a Revenue Ruling on wash sales, that
says that the wash sale rule applies (admittedly, a different rule) even if
one sells in a taxable account and repurchases in an IRA. Revenue Ruling
2008-5. http://www.irs.gov/pub/irs-drop/rr-08-05.pdf So I don't have any
idea about the interplay between IRAs and taxable accounts in the context of
average basis accounting.

Mark Freeland
nNeEwTs[at]nyc.rr.com

--
<< ------------------------------------------------------- > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2007) - All rights reserved. > << ------------------------------------------------------- >