1

Background:


I want to sell one mutual fund that I own in Vanguard to claim a tax loss on it. The default cost basis offered in Vanguard is "Average Cost" method. But I calculated that if I use the spec id method, I would be able to claim a greater tax loss. So I have updated the cost basis method in Vanguard to use specific lot id for selling the fund.

Vanguard is not able to show lot id for shares that I had purchased before 2012. Though I am able to get this information from the transaction history. If I continue to sell the shares, Vanguard states that it will report only the average cost basis to IRS.

My questions are:


  1. Will I be able to use the specific shares cost basis for shares bought previous to 2012, if Vanguard reports only the average cost basis to IRS?

  2. If I am allowed to use the spec lot id method, how should I inform IRS when filing taxes next year about the cost basis that I calculated using specific shares?

  3. What kind of documentation will I need to provide as proof for the specific share cost basis calculation?

  4. If I want to buy back the same fund and avoid it being categorized as a wash sale, according to IRS rules for wash sales, I need to wait for at least 30 days. When does this 30 day period start? How would it get affected if I sell shares over multiple days versus in a single day?

1

Will I be able to use the specific shares cost basis for shares bought previous to 2012, if Vanguard reports only the average cost basis to IRS?

Yes.

If I am allowed to use the spec lot id method, how should I inform IRS when filing taxes next year about the cost basis that I calculated using specific shares?

It should appear on your tax return, Schedule D and the associated forms.

What kind of documentation will I need to provide as proof for the specific share cost basis calculation?

If asked, you need to be able to show all the transactions for this fund. Once you use specific lot - you have to keep using specific lots.

If I want to buy back the same fund and avoid it being categorized as a wash sale, according to IRS rules for wash sales, I need to wait for at least 30 days. When does this 30 day period start? How would it get affected if I sell shares over multiple days versus in a single day?

It starts on the date of the sale at loss, and goes into both directions. I.e.: you cannot buy 30 days before or after the sale at loss. If you have multiple sales, there's 30 days period (both directions) for each, which may or may not overlap.

  • so this would mean the period for preventing wash sales is actually 60 days? 30 days before and 30 days after the sale claiming loss? – EndlessSpace Sep 28 '15 at 15:59
  • @EndlessSpace yes – littleadv Sep 28 '15 at 16:08

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.