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Due to the stock market going down, I got a margin call, and may be forced to sell a few thousand dollar worth of stocks.

However, I am lucky enough because I ended an employment with an agency, and my 401k there can be rolled over to my IRA and Roth IRA (they were in an S&P 500 ETF and T Rowe Price Growth Fund), and they must be rolled over as cash, so I also have a few thousand dollars to buy back those shares.

In other words, let's say I am forced to sell due to the margin call, 50 shares of stock at $80, at a loss of $10 per share, but I can buy back 50 shares of the same stock at $80, but now in my IRA or Roth IRA account, is it considered to be a "wash sale"?

However, is it true that if I don't care about claiming the loss of the $10, then it really doesn't matter? For example, if the stock is in the Roth IRA and when I sell them many years later when I am 65, there is no tax involved, so I don't care if it has a basis of $80 or $90, so I can just considered it "not squeezed out by the margin call but I just transferred it to the Roth IRA?"

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When you have a wash sale that is triggered by buying within an IRA, that tax benefit of that specific loss is permanently lost, since the loss is disallowed and the cost basis within the IRA is not adjusted (source).

So if you truly don't care about the loss since it's not material to your finances overall, then that's what will happen.

The alternative would be to wait 30 days before buying the exact same shares in your IRA (buying something else in the meantime), then you can still claim your loss this year.

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  • when you say "that tax benefit is permanently lost", you don't mean the tax benefits of my "no tax when I sell and take out the money in my Roth IRA when I am 65", right? The tax benefits over there still exists Jul 5 at 16:18
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    No, I mean the tax benefit of that specific loss (the $10 per share). Certainly the benefits of the IRA in general still apply.
    – D Stanley
    Jul 5 at 16:33
  • I see the loss of $10 as a no big deal at all, because I am able to have the same number of shares in my Roth IRA account. However, I guess you can argue that I could have just used $4000 to buy those shares in my Roth IRA account anyway without selling those at a loss. I guess that's true, but just that it can't be perfect in every way, so that's ok Jul 5 at 16:46
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    Well the total loss is $500 if you bought 50 shares, and the tax benefit is 20-30% of that (depending on your tax bracket). So it's not going to change your life but there is a way to work around it. Buy similar stocks or an ETF (or just leave it in cash) for 30 days within your IRA.
    – D Stanley
    Jul 5 at 17:05
  • yes, no worries because it is $500. Compared to inflated prices, of everything doubling in price, so when I sell my house, although it never really went up in price relative to everything else, I am subject to paying $250,000 in tax, so $500 is nothing Jul 6 at 14:22

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