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Posted by Han on April 8, 2008, 6:24 pm
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>
>> > Phil Marti wrote:
>> > >>If you sell a stock in a taxable account at a loss and then buy
>> > >>it back in an IRA account within 30 days, are you allowed to
>> > >>claim the loss?
>> > >
>> > > No, according to the IRS. I don't know if it's been litigated,
>> > > but I
>> don't
>> > > think so.
>> >
>> > I thought we had a definitive answer back in December:
>> >
>> > The IRS yesterday issued an advance copy of Rev. Rul. 2008-5,
>> > 2008-3 I.R.B. ___ (1/22/08), which applies the § 1091 wash sale
>> > rules where a taxpayer sells stock or securities at a loss and then
>> > causes her IRA to purchase substantially identical stock or
>> > securities within thirty days.
>> > As a result, the loss on the sale is disallowed and the
>> > taxpayer's
>> > basis in the IRA is not increased.
>> >
>> > http://taxprof.typepad.com/taxprof_blog/files/rev.%20Rul.%202008-5.p
>> > df is a copy of the ruling.
>> >
>> > Good FAQ item, BTW.
>>
>> I'd say that such could be a bad ruling. In general, a taxpayer and
>> his IRA are separate (but related) entities, especially for ownership
>> purposes (although one owns the other).
>
> But the ruling is consistent with the spirit and intent of the wash
> sale rule. The purpose of the rule is to prevent taxpayers from
> turning paper losses into realized losses, and thus reducing their
> tax, with little risk of missing an increase in the security's value.
> Selling outside the IRA and then buying inside the IRA would be a
> pretty effective way of doing this, although also it has the effect of
> turning future capital gains into future ordinary income when you
> withdraw from the IRA.
>
> I could definitely see why they'd want to prohibit this in the case of
> Roth IRAs. You'd get to realize the loss, but then repurchase the
> security and never pay tax on the subsequent growth.
>
So I sold with a gain that was much smaller because of the current slump,
and purchased into a Roth. For both 2007 and 2008. Since I didn't have
a loss, it is legal? <grin>
--
Best regards
Han
email address is invalid
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