Can someone let me know if my gut reaction on this is correct?
I just had some funds distributed to Vanguard from an inherited investment account. I am planning to slowly sell off some of the mutual funds, because they have higher fees than I’d like, but I’m trying to avoid a large taxable event.
Now that the cost basis has finally transferred, these two mutual funds are showing short or long term losses.
If I sell these shares and use the proceeds to buy VTI, that’s a net negative on my taxes, right?
So not sure what the rules say around the timing of acquiring inherited shares so you’d want to check that just to make sure you don’t trigger a wash sale when you sell…basically if you want to take a loss on a stock and have it be useful on taxes, you can’t have acquired the same/substantially identical stock within 30 days before or buy it back less than 30 days after. Given your reference to VTI I’m assuming you’re not going to buy the same thing so that’s probably irrelevant (although it’s good to make sure you’re not buying the same thing in any other accounts because it doesn’t have to be a buyback within the same account to matter), but I don’t know if the before clock for wash sales starts when you acquired the shares or when the person you inherited from did.
Having said that, you can offset capital gains with capital losses, and if you’ve got more losses up to $3000 in ordinary income/year…if you’ve got more than $3000 you can also carry over year to year until it’s used up (I miscalculated last year and have like $58 for next year which is a little annoying to remember but it’s just another line on a form).
Thanks! Technically it was an in-kind transfer from an inherited trust, but you’re right, I don’t think I know if there are any specific rules in this situation about selling within a certain period of time.
I’m definitely not buying the same thing, I’d much rather consolidate into some more low fee / tax friendly funds (thus the VTI) and keep my bonds in my tax-advantaged accounts.
