Are transactions entirely within a Roth account ever subject to wash sales?

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September 2017

Transactions totally within a Roth or Traditional IRA will not incur gains or losses...or any taxable event (other than UBTI issues) until money is withdrawn.  As withdrawals from Roth IRAs are TAX FREE, wash Sales are not relevent for transactions entirely within a Roth IRA (or 401k).  

A wash sale occurs when an individual sells or trades a security at a loss (in a taxable account), and within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so.

A wash sale also results if an individual sells a security and a loss and it is repurchased in any other account that is owned by the taxpayer, their spouse or even a company/entity by the individual buys a substantially equivalent security.  So if you sold a security at a loss in a taxable brokerage account and then re-purchased a "substantial identical" security in another account (even a Roth IRA), you will be subject to wash sale rules.

When you have a wash sale, the loss is then disallowed (via Schedule D on your tax return) and the basis on that sold stock reverts to what it was before the sale.

The tax issues that come up with Unrelated Business Taxable Income (see UBTI discussed above) typically happen when your Investemnets are in a self-directed IRA and you hold non-traditional/non-publically traded securities or securities that utilize vehicles like futures contracts.


September 2017
September 2017
September 2017