ripvanwinkle
Well-Known Member
All that is necessary for evil to succeed is that good men do nothing - Edmund Burke 1729 -1797
Joined: Jan 9, 2011 22:36:42 GMT -5
Posts: 1,342
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Post by ripvanwinkle on Nov 1, 2018 20:45:58 GMT -5
According to the IRS, a wash sale is "individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so".
As I read this, if I sell McDonald's and buy Burger King, that's plainly a wash sale. What if I sell IVV fund and buy SCHG fund? Both funds have a lot of same stocks in it. Is that a wash sale? What about other funds that have similar stocks in it's portfolio? With funds, how does one know if it violates the “substantially identical” clause?
What if I sell a large cap fund and buy a small cap fund. Is that a wash sale? What about sector funds? Would selling and buying the same sector be a wash sale?
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spartan7886
Familiar Member
Joined: Jan 7, 2011 14:04:22 GMT -5
Posts: 788 
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Post by spartan7886 on Nov 2, 2018 8:23:13 GMT -5
My understanding is that the IRS is pretty narrow in their definition of a wash sale. McDonalds and Burger King is definitely not substantially identical - they are competitors. IVV and VOO on the other hand, would be. I think generally with index funds you are looking for are they trying to match the same index. I would be more worried about IVV and SCHX than SCHG, which is targeting growth stocks.
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