Wash Sale and IRA question

I have the same mutual fund in my joint taxable account as my wife has in her 401K.
I have about $20K in losses in my taxable account for which I want to harvest.
However, the fund just made a capital gains distribution last week and while I took the proceeds in cash in the taxable account, the proceeds in the 401K were automatically reinvested. The number of shares reinvested is about 7% of the number of shares I wish to sell in the taxable account to harvest the losses, so the amounts are significant.
Would selling all shares in the fund within the 401K a few days before we do the lost for the purpose of tax loss harvesting so that we no longer owned replacement shares when we took the loss avoid a wash sale?
I have the same question (albeit smaller amounts) if the reinvested dividend was within an IRA.
I appreciate any replies. Thanks.
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snipped-for-privacy@yahoo.com wrote:

Are you also selling all shares of the fund in the taxable account? Then this should work. Basically, for purpose of applying the wash sale rule you treat your taxable and non-taxable accounts as a single portfolio.
Investopedia has a good article on this.

Isn't that where the reinvested dividend is above? Did you mean to change the conditions?
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Barry Margolin
Arlington, MA
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I was only planning on selling some of the shares in the taxable by specific share ID - only selling the losers.
The reinvested dividend was in the IRA only, which I couldn't control.
The dividend in the taxable was paid into my bank account and was never used to repurchase any shares.
If I sold all of the IRA shares, I don't see why I can't use specific ID on the taxable shares to declare the full loss in the taxable.
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snipped-for-privacy@yahoo.com wrote:

When you have a wash sale, you can't declare the full loss unless you fully dispose of all positions in the taxable account. It doesn't matter which account the purchases were in.
If you're selling 1000 shares at a loss in the taxable account, and purchase 100 shares in the IRA, you can declare the full loss on 900 shares. The other 100 shares do not declare a loss.
Normally when you have a wash sale, the disallowed loss is added to the cost basis of the replacement lot (this is important when determining gain/loss for future sales). However, IRS Pub 550 says "except in case 4", which is when the replacements are in an IRA or Roth IRA, but doesn't say where the disallowed loss is allocated in that case. My guess is it would be distributed somehow to all the remaining shares in the taxable account, but should it be spread evenly, added to the oldest lot, or what?
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Barry Margolin
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The article at the link below on Fairmark.com cites Rev. Rul. 2008-5, which says that you lose the basis adjustment if you bought the replacement shares in an IRA. You can't apply the disallowed loss anywhere. You can never claim the loss.
https://fairmark.com/investment-taxation/capital-gain/wash/wash-sales-and-iras/
Bob Sandler
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Again, to review Purchase 7 shares of XYZ in IRA on Dec 13 through dividend reinvestment Sell all shares of XYZ in IRA on Dec 17 Sell 100 shares of XYZ in taxable through specific ID on Dec 20th.
The question is. If I have already disposed of all shares XYZ in another account when I sell the taxable shares, do I even have a wash sale since the replacement shares are already gone.
Alan and joetaxpayer, say I do not.
Barry, are you disagreeing and saying that I do have a wash sale anyway because of a purchase within the 30 day window?
I do not want to lose the loss permanently even if it means taking the loss next year after the 30 days are up so I am really trying to understand this.
Thanks
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snipped-for-privacy@yahoo.com wrote:

That's what I'm saying. For the purposes of determining whether you have a wash sale, you do not distinguish between the IRA and taxable accounts.

Yes, that's what you have to do -- wait at least 30 days after the dividend reinvestment before selling your shares in the non-taxable account. Then you don't have a wash sale.
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Barry Margolin
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https://fairmark.com/investment-taxation/capital-gain/wash/wash-sale-matching-rules/
But according to the matching rules described by Fairmark, the wash sale rule is applied chronologically so that the losses from 12/17 use up all of the replacement shares purchased on 12/13. Therefore there are no replacement shares from 12/13 left to be matched to 12/20 even if I don't sell all of the shares.
So Barry, I'm not understanding why you think I have a wash sale anyway.
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On 12/17/18 7:04 AM, snipped-for-privacy@yahoo.com wrote:

A wash sale involves selling securities at a loss and repurchasing identical or substantially identical securities within 30 days before or 30 days after the sale. You state that you want to sell securities in your taxable account at a loss and also sell securities in a qualified retirement account. There is no wash sale as you are not buying anything!
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On 12/17/18 3:01 PM, Alan wrote:

"the fund just made a capital gains distribution last week and while I took the proceeds in cash in the taxable account, the proceeds in the 401K were automatically reinvested"
There was a purchase that technically creates a potential wash sale. Although, I wonder how common it is for these to ever matter. Still, his proposal to sell all shares will clear up any issue.
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Let me clarify. Both taxable and 401K hold mutual fund XYZ.
1) Dec 13: Dividend received in 401K automatically reinvested in XYZ. This is the purchase that concerns me. 2) Dec 13: Dividend received in taxable paid out as cash. Not reinvested. 3) Dec 17: All shares of XYZ are sold in 401K. 4) Dec 20: I'd like to sell most but not all of the shares of XYZ in my taxable at a loss.
Do I have a wash sale?
I'm hoping that because on Dec 20th, I would no longer own replacement shares. However, I am concerned about the purchase within the 401K on Dec 13th.
I hope this clarifies and I appreciate any responses.
Thanks.
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On 12/17/18 3:14 PM, snipped-for-privacy@yahoo.com wrote:

Sorry I missed the fact about the reinvestment. If you sell the shares in the 401K PRIOR to your selling the shares in the taxable account, you would for sure not have a wash sale.
Some preparers might argue that regardless of what you do in the 401K, you do not have a wash sale. They might take that position by narrowly construing the 2008 Revenue Ruling (2008-5) only applies to IRAs and Roth IRAs. Personally, I would not feel comfortable taking that position as the ruling in 2008 does contain a statement that the ruling accounted for the fact that the issue related to a non-taxable trust. I do not see how the IRS would not apply it to other non-taxable trusts. That said, there is no formal IRS written position that I am aware of, that says the disallowance of the loss also applies to all other non-taxable trust accounts such as 401K, 403b, 857, etc.
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wrote:

I was always under the impression that when you have an automatic re-investment of distributions, for tax / holding period / basis purposes it's the same as buying a security (even though you didn't take a specific action). And don't you now have to account for every re-invested distribution after a sale (whereas in the past you could just use "various" as purchase date and net out all the long term/ short term shares)?
scott s. ..
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