☕ DrinkCoffeeAndProfit
Smart money moves before breakfast
Inspiration Quote for the Day
“The avoidance of taxes is the only intellectual pursuit that still carries any reward.”
John Maynard Keynes
The Morning Ritual
Curtis Harvested a Loss in December. The IRS Did Not Count It.
Curtis sold a fund in early December at a loss he had been carrying since spring. The plan was sound enough. Bank the loss, trim the tax bill, stay invested in the same corner of the market. Eight days later he bought the same fund back inside his IRA, where he does most of his trading.
The loss did not reduce his tax bill. It did not carry forward either. It went nowhere at all, and no form flagged it, because the two accounts do not talk to each other. Curtis found out fourteen months later, from his accountant.
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In One Sip
► The wash sale window runs 61 days, the sale date plus 30 days on either side of it
► A loss disallowed by a repurchase in a taxable account is added to the new shares, so it is deferred rather than lost
► A repurchase inside an IRA is different, and Revenue Ruling 2008-5 makes that loss permanent
► Brokers often miss a wash sale when the two trades sit in different accounts
► Reporting it is your obligation even when the Form 1099-B does not show it
Why It Matters for Your Money
The rule is older than most of the funds it catches. Section 1091 disallows a loss if you buy a substantially identical security within 30 days either side of the sale. That is 61 days in total, counting the day of the sale itself.
Inside an ordinary taxable account this is a delay rather than a penalty. The disallowed loss is added to the cost of the replacement shares and the holding period carries over. You get the deduction back whenever you finally sell.
The IRA version has no such mechanism. Revenue Ruling 2008-5 applies the wash sale rule when the repurchase lands in your own IRA. The ruling does not let you raise the basis of an IRA. The loss is disallowed with nothing to attach it to.
So the same mistake carries two different prices. Made inside a taxable account it costs you timing. Made once across the line into an IRA it costs you the loss outright, and there is no filing that reverses it.
Then there is the part the paperwork hides. A broker reports wash sales for identical securities held in one account. A second account at the same firm, a spouse’s account, another broker, your own IRA: none of that is visible to it. The form is not the referee, and the duty to report sits with you.
Which is why December trades deserve a list. Your own list, written before the sale rather than after it. It covers every account in the household, not only the one you are selling from.
Before you sell anything at a loss this year, write down every account that could hold the same security. Taxable, IRA, Roth, a spouse’s accounts, a second broker, and any automatic dividend reinvestment. Reinvestment is the quiet one, because it buys without asking you first.
☕ Key Insight:
The thirty day clock does not care which account you are standing in. It follows the security and it follows you, and the only place it is tracked properly is a page you keep yourself.
The thirty day clock is not the only one running this quarter. The next message is from a partner, on one that closes on a fixed date.
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The Coffee Break Move
If you want the loss to count for this year, the trade has to be done by December 31. The trade date governs it, not the settlement date. Losses beyond your gains offset up to $3,000 of ordinary income. Whatever is left carries forward with no expiry date.
Switch reinvestment off on that holding for the window, or sell and simply wait the 31 days. If you want to stay invested meanwhile, a different issuer’s fund tracking a different index is the usual route. The agency has never defined substantially identical for funds.
The replacement you pick outlives the tax year that prompted it. The next message is from a partner, on a single stock.
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The claims above are the advertiser’s own.
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One Last Sip
The loss Curtis gave up was not a large one. What it bought him was an expensive sentence from his accountant, delivered more than a year after the trade that caused it.
A loss counts only when the calendar and the paperwork agree that it happened. One of those two is checked for you. The other is the one that catches people, and it is the one you can still fix this week.
Set aside twenty minutes before the first week of December. The list takes about that long and it costs nothing. It is the one part of this that no broker can do on your behalf. Everything after it is just placing the trade.

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