Like kind exchange

Am I correct that I cannot do a "like kind exchange" under the IRS regulations to exchange shares in an S&P 500 mutual fund for shares in an S&P 500 ETF?

Reply to
Bill
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Yes. Stocks and other securities are excluded from like-kind exchange rules.

-Mark Bole

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Reply to
Mark Bole

Yet if the SP500 fund were sold at a loss and the SP500 ETF were then purchased within 30 days, it'd probably be considered a "wash sale" and you wouldn't get to recognize the loss.

Reply to
BreadWithSpam

How does one deal with such IRS rules that leave particular situations out?

How about doing the same with a sector ETF, say sold EPP to buy PAF?

Thanks.

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Reply to
Augustine

Disclose your position and start the clock on the statute of limitations.

With all due respect to BreadWIthSpam, the original topic of the thread has been diverted to wash sale rules. I think he was trying to contrast the different treatment of like-kind exchanges of business/investment property with wash-sale rules regarding "paper losses" on securities sales.

No one ever said the tax laws were internally consistent!

-Mark Bole

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Reply to
Mark Bole

It was. I thought the original topic had been closed very quickly and decisively by you already, though. (And, thanks, by the way).

If there was further uncertainty about the original question, I apologize if I've derailed that.

And some of the asymmetry of treatment of gains versus losses. (ie. they can force you to postpone losses but don't allow you to postpone gains)

True enough.

As far as the wash sales, I still haven't seen any final and authoritative answer regarding if one sells for a loss in a taxable account and then buys back inside an IRA. I've read that it doesn't count because either (a) you and the IRA trust are distinct legal entities; and/or (b) because the IRA is treated differently for taxes anyway. The Smartmoney article doesn't even seem too certain ("however, there is apparently nothing to prevent you..."). I thought we'd discussed this here before and can't recall any decisive conclusion.

Reply to
BreadWithSpam

Define "final and authoritative".

Very recently (December, I believe) the IRS *finally* issued its official position. See Rev. Rul. 2008-5.

As expected, the IRS position says it's a wash sale. Not only that, the disallowed loss is forever lost, not merely deferred.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

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Reply to
Rich Carreiro

personally, I think a "final decision" is made by a court of law. Preferably the Supreme Court, but a few Appellate courts in agreement will do.

The "final" IRS position on expensing roofs is, well, just wrong.

I make no inference with regard to the present issue in this thread, just making a comment on "final decision".

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Reply to
Gil Faver

I've just thought of a case where such an exchange may be allowed - if both the fund and the ETF are just different share classes of a single fund. The only place I know of where that's the case is at Vanguard. But just as one may swap "investor shares" for "admiral shares" if one's account is large enough, and do so without any tax consequences (or just as one may exchange "b" shares of a load fund for "a" shares"). That's actually called a "conversion" and not an "exchange".

(another time when something similar happens is when one fund is merged into another - shares of the first get converted into shares of the second when the assets of the first are merged into the portfolio of the second)

Anyway, after my comment last night about the topic having been fully addressed before I changed it, this occurred to me. It's probably doesn't apply to many folks, but it is something of an exception to the rule.

Reply to
BreadWithSpam

FWIW, while this will work for some Vanguard index funds, you can't do this for an S&P 500 fund (the OP's question), because Vanguard has no license (from Standard and Poors) to offer ETF class shares of its S&P 500 fund.

Also, the conversion must be handled correctly by the broker (for Vanguard funds with ETF and retail share classes); otherwise the swap is still a taxable event. Fractional shares may be problematic.

Here's a letter from a Vanguard attorney to the SEC, which among other things, describes how and why this conversion works as a non-taxable event (see section H):

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Mark Freeland snipped-for-privacy@sbcglobal.net

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Reply to
Mark Freeland

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