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by vmception 1616 days ago
> and the stock goes back up by the end of January so you’d be even, you are way behind

there are ETFs created for the sole purpose of circumventing this, by providing exposure to the same asset or market forces

the wash sale regulation has amendment aimed at preventing this by prohibiting trades of "substantially similar securities", but I don't think it passes muster or has any teeth. you report all the trades to the IRS its up to them to figure out if your UltraShares 3x Inverse Pez Dispenser ETF is substantially similar to the Direxion one
2 comments
whitej125 1616 days ago
The wash sale rule has teeth. Currently, trades on a stock or direct derivative (options tied to that stock) will all trigger the wash sale rule.

I have never seen an ETF of a single security. Got an example? It would be hard for me to fathom that one could be made and remain economically viable but who knows.

ETFs however, do currently provide some loopholes with wash sales. While selling/buying AAPL within 30 days is a wash sale... selling VOO and buying IVV (both which track the S&P 500) within 30 days is currently not considered a wash sale.

You see some explanations as to why that currently is (technically those two ETFs are from different asset managers... so they have some different risks, etc). But it looks like the rule just hasn't been amended and maybe the IRS doesn't see this as prevalent enough of a case to change the tax code.

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bagacrap 1616 days ago
direct indexing helps with this as well --- own thousands of individual stocks that collectively act as an index, and trade in some losers for their similar competitors every time you have to realize gains

But it's not exactly the case you could pull this off with, say, Tesla, unless there's some ETF that's 99% TSLA (is there?)

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vmception 1616 days ago
> But it's not exactly the case you could pull this off with, say, Tesla, unless there's some ETF that's 99% TSLA (is there?)

Don't know, doubt it but its a business opportunity. It’s why there are so many ETFs, take your 20 basis points from investors and work on something else.

More likely to find an ETF that hasn't rebalanced and has a large holding of Tesla.

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whitej125 1616 days ago
I direct index... but I don't tax-loss-harvest the index which is what your are describing here (just noting that you can direct index and not do TLH if you want to).
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