Maybe a picture helps. Another poster also asked for examples of good and bad setups from a wash sale perspective. That other poster had Taxable and Tax-Deferred (His Trad 401k & Her Old 401k) accounts.Can you help to explain a little bit?Pick a fund for Taxable that you are not already holding in Tax-Deferred Trad & Tax-Free Roth.
In the "bad" scenarios, you could end up with a wash sale as follows:
1) Sell "the fund" in Taxable at a loss (perhaps trying to do Tax Loss Harvesting).
2) Inadvertently buy "the fund" (same or substantially identical) in either of the 401k accounts within ±30 days of the loss sale date. This might happen because of automatic contributions to the 401k or automatic reinvestment of distributions in either account.
3) You now have a wash sale and cannot claim the loss from #1 on that year's tax return. It might be flagged as a wash sale in box 1g of your 1099B, but even if it's not, it's on you to file your taxes correctly and not claim the disallowed loss.
That whole wash sale thing is avoided with the "good" scenarios since the fund in Taxable is not "substantially identical" to the funds held in the two 401Ks. Had this poster also had a Roth IRA, it would've been lumped in with the 401Ks as a tax-advantaged account.
If that's not clear, let us know what still doesn't make sense and we can try different language and/or examples to help you understand.
Statistics: Posted by bonesly — Thu Aug 22, 2024 9:32 pm — Replies 9 — Views 1217