A recent thread asked about triggering the wash-sale rule by selling a mutual fund or ETF that was enrolled in dividend reinvestment.
I'm in that situation too. The money impact isn't that great --15% of
$660 -- but the paperwork is daunting.
Is there any chance that automatic dividend reinvestments could be an
exception to the wash-sale rules? At worst they're a partial
exception, since they tend to be fractional shares. Unfortunately,
Vanguard's VXUS ETF (international stock index) declares large
quarterly dividends, compared for example to the total US stock fund,
VTI. The December VXUS dividend was about 10% of the dollar value I
want to sell for rebalancing.
Here's a URL I found on this issue:
Quote: "For the casual investor I suggest you ignore the effects of
wash sales. Vanguard (and other brokers) are not required to compute
the tax consequences of a wash sale and adjust the cost basis of
shares appropriately. If you are making $1,000 investments every
month and then need to withdraw $30,000, and you have a trade lot
with a significant loss, the wash sale rules will realize $29,000 of
the loss and be subject to using the $1,000 trade lot that is within
30 days. For the casual investor, the benefits of saving and
investing $1,000 every month or reinvesting dividends outweigh the
potential wash sale if you you don?t think you are going to have
I don't quite understand what is meant by "ignore the effects of wash
sales". Does he mean that they _are_ wash sales, but we shouldn't let
them affect out investing strategy, including rebalancing? Or does
that bit about "are not required to compute the tax consequences"
mean that if I sell at a loss with 30 days after a dividend
reinvestment I am truly not subject to the wash-sale rule? This is an
ETF, if it matters -- not an individual stock or even an old-style
- posted 1 month ago
-- Stan Brown, Oak Road Systems, Tompkins County, New York, USA http://BrownMath.com/
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