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Posted by joetaxpayer on December 7, 2007, 4:21 pm
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zxcvbob wrote:
> I think I know the answer to this, but I want to get a second opinion or
> two.
>
> I recently bought a "falling knife" in my taxable investment account. I
> think it was a good purchase, I just bought a week too early. I'm
> sitting on about a $1000 short-term loss. The stock is very volatile,
> and if I sell it and wait 31 days I could possibly miss the rebound (or
> not; who knows.)
>
> I also have a lot of cash sitting in my Roth IRA.
>
> If I sell the taxable position and immediately purchase the same thing
> in the IRA, does the wash sale rule apply? I think it does not apply
> because transactions inside an IRA account are not taxable events. What
> do you think?
>
> Thanks,
> Bob
I asked this same question some time back. The consensus response seemed
to be that it was still self-dealing, that the loss would be lost
completely as it's washed from the post-tax account and the IRA has no
basis to drop by the washed loss.
In practice, it would take an audit to catch this, but I decided long
ago to keep my returns bullet proof. Receipts for the rental property's
expenses, and notes documenting the use. Proper receipts from charities
for checks sent, and pictures of donated items. Not worth the risk.
JOE
www.joetaxpayer.com
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