Wash Sales on Basket Portfolios
Summary of User’s Issue and Solutions Discussed:
- The main problem reported by the user is experiencing wash sales on positions after selling a portion of a Fidelity baskets portfolio, despite only selling and not rebuying shares within a 30-day period.
- Fidelity’s representative explained the IRS definition of wash sales and noted that their system tracks wash sale activity only within the same account for the same security.
- The user was advised to consult a qualified tax advisor for personalized guidance, as Fidelity cannot provide tax advice.
- The user inquired about whether the disposal method (FIFO or LIFO) would impact the basket portfolio when selling shares, indicating a need for clarity on how existing holdings interact with basket sales.
Here’s the full thread
I sold a portion of a fidelity baskets portfolio to free up some cash. I choose to use the weights I have assigned to each position and only supplied the dollar amount I wanted to sell from the basket. Now I’m seeing wash sales for some of my positions? I’ve only ever gotten wash sale from selling and rebuying at the lower price within 30days but never on buys I made in the past.
Hey there, @kennyisnotdead!
You seem to be familiar with the general definition, but to review, the IRS defines a wash sale as a sale or other disposition of stock or securities on which the seller realized a loss within a 61-day period (beginning 30 days before and ending 30 days after the date such sale or disposition took place) and replaces it with stock or securities that are the same or “substantially similar.” More specifically, the wash-sale rule states that the tax loss will be disallowed if you buy the same security, a contract or option to buy the security, or a substantially identical security.
All or a portion of any loss (realized at the time of the sale) may be disallowed or postponed under current IRS regulations. The amount of the disallowed loss will automatically be added to the cost basis for the remaining shares of the security. Purchased lots with an adjusted basis are marked with a “W” on your positions page, and the “washed” lots are adjusted permanently.
That said, it’s important to remember that Fidelity’s systems will only track wash sale activity that occurs in the same account for the same security. In these cases, we will adjust your cost basis information for you. However, in cases where we cannot track trades causing a wash sale, it’s up to the account owner to track them, as the IRS may take a more strict view and consider all of your accounts across all institutions in which you invest. As Fidelity cannot provide tax advice, a tax professional is your best resource to understand your specific situation, and to ensure any transactions are properly reported.
I’ve dropped a few links below with some additional insight on the wash sale rule:
Wash sale: Avoid this tax pitfall: https://www.fidelity.com/learning-center/personal-finance/wash-sales-rules-tax
IRS Publication 550*: blank” rel=”noreferrer” title=”https://www.irs.gov/pub/irs-pdf/p550.pdf”>https://www.irs.gov/pub/irs-pdf/p550.pdf
Please let us know if you have any further questions. We’re here as a resource, so just let us know how we can help.
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Thank you. Since I had a position before using baskets it has become a bit more complicated. Of the disposal methods would FIFO or LIFO be a better option for the account if I were to sell using the baskets interface?
You got it!
Ultimately, that decision will be up to you. If you have questions on what you should do, we recommend speaking with a qualified tax advisor, as Fidelity cannot provide tax advice.
If you have questions outside of this, please follow up and let us know! 🟢
I do not need any tax advise I’m only trying to avoid wash sales when I have an existing holding before using a basket portfolio and a position in the basket portfolio in the same account. Does the disposal setting on the account have any effect the basket portfolio when I sell a portion of it through the baskets interface?
And does the basket take into consideration the existing holding in the account? Example owning AAPL in a basket and having and existing position. If I were to sell some shares in the basket and have the disposal method set does it factor in the buys done in my account outside the basket.