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aws

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  1. I'm not sure how serious you are being, but obviously Turbotax would not catch something like this which may not even be reported anywhere in your tax documents. If you sold your shares in one account and bought them back immediately in another account, your broker wouldn't report that as a wash sale as they wouldn't know the purchase happened, and since it's not in your tax documents it wouldn't be picked up by Turbotax.
  2. Any of the doctrines of substance over form, step transaction, or sham transactions would make the whole thing fall apart if under audit, even if each individual transaction would appear to work. There's other ways to accomplish the same thing that also wouldn't work if examined: For example, if I owned 30k worth of stock that dropped to 15k. I could sell that stock, gift the 15k to my brother, he could buy the stock in his name, and then gift the stock back to me. Now I have the shares with the lower basis (his cost) and a tax loss. All transactions are below the annual gift limits so they are not even reportable, and each on their own is a perfectly fine thing to do, but together they are not allowed.
  3. I know nothing of Canadian tax law, sorry.
  4. I see now that the discussion is more about whether you can skip the 31 day hold period with this strategy. That I am much more skeptical about and I'd really like to see the original suggestion by the Deloitte partner, as I suspect some important details may have been omitted by the article author. If I were an IRS agent and I were auditing someone who: 1. Sold stock for a loss 2. Bought a call option to trigger a wash sale 3. Immediately sold the call option to lock in the loss 4. Bought back the stock the same or next day and claimed a fresh cost basis I would invoke substance over form and say there was no real sale and no loss is allowed.
  5. I'm not sure what you mean. If ACB is adjusted cost basis, then there is no adjusted cost basis in this scenario as by waiting 31 days you avoided the wash sale adjustment entirely.
  6. There's a lot of posts I'm not sure I want to read here, but from skimming it seems like the whole argument about whether this situation is a covered call is kind of missing the point. We are all in agreement that it is fine if you double down on a stock in a losing position, wait 31 days, then sell the high basis stock for a loss and keep the low basis shares. The proposed transaction of buying a call option plus the long stock is essentially also doubling your long position, and it should open up an opportunity for tax loss harvesting just like if you bought more of the stock. So if the call option is considered substantially identical to the original shares, then I see no reason why it wouldn't work. Using the deep in the money call example, every scenario after 31 days is exactly the same as if you just doubled your position with shares, with the exception of if the stock dropped so far that the deep ITM call was now OTM and you did not exercise. So there's that tiny chance of an upside, but you also pay a tiny premium there so it's not really a huge advantage. If you used ATM or OTM calls then you are risking much less to double your position, and you may have a more efficient way of doubling your position, but you also pay a higher option premium to do so and if it's far OTM you risk it no longer qualifying as a substantially identical position.
  7. aws

    WTF?

    I have surveyed the FIRE community, and while it doesn't really fit my lifestyle, I certainly wouldn't characterize them as a miserable lot. Many people have huge amounts of fat to trim in their budgets - spending that provides little incremental benefits or even causes a burden when you accumulate a bunch of useless junk that clutters your house. Removing those layers of spending and working toward financial independence should make you happier, not miserable. Although that's mostly just for the people who were high income to begin with, as it's a lot easier to try to save half of a 300k income than half of a 30k income.
  8. Shame when they go so young...
  9. Yeah, that will be more of a headache if it comes to pass. Presumably they will issue guidance by the time it becomes effective so we would know more than we know now about what they would consider reasonable. And if you think that's bad just imagine the accounting nightmare that would happen if some type of wealth tax were ever passed. There every asset of every person would need to be valued every year no matter how it is held. And of course they'd need to supplement it with a million rules to avoid you shifting assets to relatives to get under the taxable threshold, so you would need to look at not just your assets but also the aggregate assets of your family to determine the tax base.
  10. I would say you could use any reasonable method for the annual value reporting since it doesn't really matter for anything. If it were me I'd probably just use something like a zillow estimate or something as it wouldn't take any work and would be at least somewhat reasonable. It's when you take it out of the IRA that you would want to have something like an appraisal to support your value, because then it actually affects your income. Valuation issues come up all the time. There can be very wide discrepancies between what someone reports and what the IRS would agree to. For a dramatic example just look at the Estate of Michael Jackson court case that was recently wrapped up. The Estate claimed a value of something like $5 million, the IRS said it was more like $1 billion and whacked them with massive taxes and penalties, but in the end they won in court and got all the penalties thrown out and only paid tax on about $100 million. In my experience, if you start with something reasonable, then even if you get audited it's likely going to sail right through. It's when you claim something egregiously low that they go after you hard. Claiming zero is as low as you can get, but at least you can support it, there's no clear alternative value, and I assume it's not a huge dollar figure unlike the MJ case, so I doubt you would have issues if it comes to that. While this law may add a new reason people may be forced to take money out of IRAs, required minimum distributions have been around a long time and they are essentially the same thing. I imagine there must be some court cases in which people have held those types of assets in an account subject to RMDs where this issue came up. There you would need to not only figure the value, but you'd need to do so every year and it would affect both how much you need to take out of the IRA and how much you pay tax on. I'd look for how the court and the IRS handled that issue since it will basically be exactly what you are talking about now.
  11. There wouldn't be any place to report depreciation deductions if the assets were owned directly, nor any benefit from doing so. You would report the value on form 5498, and they want you to report fair market value. So just like you would report the current market value of stocks, not original cost basis, you would report the current fair market value for real estate and not some cost minus depreciation calculation like you might do for a partnership or individual tax return. This is a snippet from the instructions to the form 5498: "Trustees and custodians are responsible for ensuring that all IRA assets (including those not traded on established markets or not having a readily determinable market value) are valued annually at their FMV"
  12. I agree it's a weird carve out. If no one changed their behavior at all as a result of the rule, then it probably benefits like a dozen people in the whole country. Mega IRAs are quite rare, and probably rarer still among those without a regular income above 400k. The few people it hits will certainly be incentivized to lower their income, if the alternative is they are forced to pay more tax due to these rules than the amount of money they otherwise would have made.
  13. Well an unvested equity award is certainly a different animal than a venture capital investment done through a self-directed IRA. Obviously you couldn't mark the shares to zero without any reasonable basis, and it's such a niche situation that I couldn't imagine you could build a strategy around it.
  14. Sometimes a value of zero is reasonable. It happens a lot with start-ups. People have unvested equity awards and they can elect to pay tax on them early (called an 83(b) election), and there's usually some piece of paper the company gives them that values them at zero or a penny or something. Whether that's reasonable or not is another question, but when you have something you can point to like a piece of paper from the company or those buybacks then zero is probably ok. Incidentally, I'm hoping to claim zero value on some stock I did a conversion on. I owned stub shares of a company in a traditional IRA, that may or may not have a payout of up to 50 cents per share in a year or something, but Fidelity immediately marked them to zero. And I then rolled those shares into a Roth IRA at zero, and if I don't know for sure I am going to get any payment I think it's reasonable, especially if the payment happens in a subsequent year.
  15. I'd have to reread what they consider self-dealing, but I can't imagine how a valuation issue would trigger that. It's things like using assets owned by the IRA for your benefit, like staying in a rental property the IRA owns, or controlling a company the IRA owns. I still think Peter Thiel's initial Paypal windfall was shady, and could have easily been self-dealing, but most of the gains came after that, and he had other legal ways of bulking up his IRA if he really wanted so he probably could have replicated the same results legitimately.
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