Wash sales and dividend reinvestment

Thanks to those who replied, even though the answer wasn't the one I wanted. :-)

I've been doing more reading, and it's even worse than I thought (or knew to ask) a week ago. For those who may not know about Revenue Ruling 2008-5:

If you have the same or "substantially identical" securities in an IRA and a non-IRA account, selling in the non-IRA and buying in the IRA can trigger the wash-sale rule, and in that case the capital loss is not just deferred but permanently lost: you can't step up the basis of the purchased security in your IRA and you can't offset the capital loss in your non-IRA against any other capital gains, nor against ordinary income. And because it's different accounts, the brokerage may provide little or no help with the accounting. Yikes!

And all of the above is true even if the accounts are in different brokerages.

For this reason, it looks like it is prudent not to have the same securities, or the same mutual funds or ETFs, in a non-IRA account and an IRA.

I know griping about taxes is pointless, but it really does seem that applying the wash-sale rule to _automatic_ dividend reinvestments is unreasonable and unfair. It causes a lot of nasty paperwork, victimizes people who aren't actually trying to do a tax fiddle, yet doesn't get much money for the Treasury. And because the wash-sale rule is for a purchase or reinvestment 30 days before _or_ after the sale, even if you know about wash sales you can't stop one from happening unless you turn off dividend reinvestment, thus going against good investment strategy.

How about triggering the wash sale rule simply because a broker split a single order into multiple lots?

The rule was created for a purpose - to prevent someone from taking a loss on stock but then essentially keeping the stock. It's a pretty blunt tool and perhaps could be more nuanced. But unfortunately at the moment it's not. If you have a better idea, write to your senator or congress person. They might appreciate an alternative that would work as well but be more nuanced.

As Stan wrote, griping about taxes is pointless, but I've already bitten ...

In the multiple lots case, do Congress and/or the IRS even need to act? AFAIK, there's nothing that requires a broker to report a wash sale when a single order is executed as multiple lots, milliseconds apart.

Could someone clarify how splitting the order could make it a wash sale? A wash sale is when you have both a sale (at a loss) and a near-time purchase. When you split an order, it goes from one sale to multiple sales, or one purchase to multiple purchases. But it's still not one of each.

Maybe I'm missing something, but how would selling at a loss in multiple lots avoid triggering the wash-sale rules?

In article <r04g6k$s5u$ snipped-for-privacy@dont-email.me you write:

If it's a single order, the lots will all be sales or all be purchases, so how could that be a wash unless it'd already be a wash as a single lot?

It seems to me that if you trade often enough that wash sales will be an issue, don't sign up for DRIP, at least not for the stocks you're likely to trade. Or if you're forced to sell a stock unexpectedly, only the most recent DRIP can be a wash.