snipped-for-privacy@webtv.net (Jim L.) I intend to sell MGSEX at a loss and buy NAESX to replace it. (MGSEX is a small-cap managed fund and NAESX is a small-cap index fund).
Would that be considered a "wash sale"--- should I wait 31 days before buying NAESX?
They both appear in the same Morningstar style box (small cap blend) but that's about where the similarity ends. To see if there's any chance of 'wash' claim, I looked at the top holdings. The top ten holdings in the Vanguard index contains 2.69% od assets, for the managed fund, 14.81%. Even then, only one stock was on both lists. I am 100% certain you have no wash risk here.
The IRS, from what I've seen (or rather not seen) hasn't spelled out the criteria for two different funds counting the same for purposes of the wash sale rule. I'd hazard to say two index funds based on precisely the same index does run afoul, but your two funds are not even close.
JOE
No. They are not substantially the same security.
I think the discussion at the following two sites, among others, supports Joe's and d's claims that the IRS would likely say (if asked) that you were not in violation of the Wash Sale rules:
Similar to the question regarding whether an IRA purchase can run afoul of wash sale rules (it can, and the IRS just made a specific statement to the point), I think the rules regarding 'substantially identical securities' can use some clarification.
While I think I'm comfortable answering when to me it's clear the two securities are not similar, there's a grey zone the IRS has not addressed. I'd agree with Fairmark that two [cap weighted] S&P index funds are similar, despite the small difference in expenses from one to the other. But for grey; How about the Rydex equal weighted S&P (ticker
- RSP) vs the regular cap-weighted Indices? In one year, one fund has outperformed the other by more than 5%. Is that enough to claim they are different? JOE
"joetaxpayer" wrote
I too saw this, though only today. For the archives:
Readers might also note the continued emphasis on how, of all mutual funds, only those buys and sells of funds tied to the same index are a focus for mutual fund wash sale violations.
Two cents: If a person considers himself savvy enough to make a profit via harvesting capital gain losses and so tax advantages in this fashion, then he can darn well figure out what risk he's taking with the IRS in doing so. ;-)
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