Wash Sale

[spartan7886]

DH bought shares of Fund A several years ago, electing to reinvest dividends. Dividends were reinvested in Fund A quarterly, including 3/30/12. All shares of Fund A were sold 4/17/12 and the money reinvested in other funds that were NOT substantially equal. Vanguard has lumped together all the short-term lots on one line and marked Various purchase dates with one total cost basis. They have also marked it not a wash sale. Do I understand that even if there is a net loss, as long as the shares bought on 3/30/12 were sold at a gain, that is why it is not a wash sale? Or is Vanguard wrong? Or is there something else going on? This also happened with Fund B at a different broker, so I'm doubting they were both wrong.

[mwcpa]

Wash loss has to do with buying within a window established in the law when you lose money on a transaction.  A subsequent reinvestment of a future dividend relted to the security you took a loss on would lead to a wash loss.

[spartan7886]

So it wasn't a subsequent reinvestment. The reinvestment was in the 30 day window prior to the sale.

[mwcpa]

Wash loss rules apply to transactions 30 days before and 30 days after the loss transaction.

[spartan7886]

So I still can't find it in Pub 550, but I've found articles from the Motley Fool and ScottTrade both indicating that it's not a wash sale if you close out the position and remain out for the rest of the year. I guess that's because the stocks bought were not intended as replacement? That would cover everything except one 2cent loss that I'm inclined to just report as a wash sale and go on about my life.

[mwcpa]

"All shares of Fund A were sold 4/17/12 and the money reinvested in other funds that were NOT substantially equal"

That's the part I missed.... if all shares were sold then their is not wash loss, provided there was not a subsequent dividend paid within 30 days of sale.

Example..

I owed 100 shares of XYZ mutual fund.
On 3-30-12 it pays me 10.00 that I reinvested (not always the best move financially) for 1 more share.
On 4-17-12 I was not happy with the performance of XYZ and I sold all 101 shares at a loss.
I never was issued another share of XYZ nor did I purchase any XYZ for a period of great than 30 days after the sale on 4-17-12.
There is no wash loss.

But, change the facts and assume that on 4-30-12 a dividend was paid and reinvested in XYZ for 10.00 and I was issued one share.  We now have a wash loss issue.

One question... did you happen to hold the same mutual fund in your IRA?

"A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA." (IRS.gov www.irs.gov/publications/p550/ch04.html#en_US_2012_publink100010601)

[spartan7886]

No, we didn't. Thanks for the help.

[mwcpa]

you may need to call the broker and it's compliance department to find out the issue

[spartan7886]

No, the broker was right. They said it wasn't a wash loss. I just didn't understand how they came to that decision when I first posted.