Jump to content

BBB new wash sale rules


ERICOPOLY
 Share

Recommended Posts

Am reading about the newest incarnation of the Build Back Better Act:

 

In addition, the BBB also extends wash sale rules to related parties. If a taxpayer incurs a loss but a related party purchases a substantially similar asset within 30 days, the original taxpayer will not be able to claim the loss. Furthermore, the disallowed loss that is normally added to the basis of the newly acquired stock will not be added (as it is in the hands of a related party and not the original taxpayer).

 

https://www.bakertilly.com/insights/build-back-better-bill-individual-tax-provisions

 

Question:

How the f*ck am I supposed to know if my sister is buying shares of a security that I am claiming a tax loss on?  This is sinister.

 

 

 

Link to comment
Share on other sites

The tax code has become too complex and a messy patchwork of rules and this should be resisted but.

It looks like the 'new' rules are simply an explicit description of what was previously implicit in the substance of previously enacted law.

It is quite possible that the new text reflects a reaction to we, the people (including sisters and other related parties), having tried to circumvent the intent behind the legislation (to somehow obtain a (n unfair) tax advantage).

In the event that the tax agency starts asking questions about related party transactions, if applicable, the idea is to simply demonstrate that the transactions were coincidental and not part of a plan. 

From a humble and anecdotal perspective, the tax people are not the brightest of the bunch but they are not stupid.

Link to comment
Share on other sites

In this context, "related party" is a statutorily defined term that ordinarily would not include a sibling:

 

"The second change would be an inclusion of a related party test when determining whether the taxpayer has acquired substantially identical specified asset. For this purpose, a related party includes the taxpayer’s spouse, dependents, controlled entities and estates and trusts, retirement and savings plans (individual retirement plan, Archer MSA, or health savings plan), Section 529 and Coverdell savings accounts, and other annuity and deferred compensation plans. The related party rule would be a substantial change and could create many traps for the unwary. The expansive listing of related parties would require taxpayers to carefully examine transactions before claiming tax losses on investment assets. It’s often the case that investments of these various related parties are managed by different firms that may not have any transparency into the other holdings, let alone able to coordinate the timing of acquisitions or dispositions. This could create significant headaches for taxpayers."

 

Source:  https://www.plantemoran.com/explore-our-thinking/insight/2021/09/build-back-better-act-top-surprises-hidden-impacts-and-implications

Link to comment
Share on other sites

47 minutes ago, KJP said:

In this context, "related party" is a statutorily defined term that ordinarily would not include a sibling:

 

"The second change would be an inclusion of a related party test when determining whether the taxpayer has acquired substantially identical specified asset. For this purpose, a related party includes the taxpayer’s spouse, dependents, controlled entities and estates and trusts, retirement and savings plans (individual retirement plan, Archer MSA, or health savings plan), Section 529 and Coverdell savings accounts, and other annuity and deferred compensation plans. The related party rule would be a substantial change and could create many traps for the unwary. The expansive listing of related parties would require taxpayers to carefully examine transactions before claiming tax losses on investment assets. It’s often the case that investments of these various related parties are managed by different firms that may not have any transparency into the other holdings, let alone able to coordinate the timing of acquisitions or dispositions. This could create significant headaches for taxpayers."

 

Source:  https://www.plantemoran.com/explore-our-thinking/insight/2021/09/build-back-better-act-top-surprises-hidden-impacts-and-implications

 

What is expanded in this new definition of related parties? I think the difference is including "dependents". Spouse, retirement plans, estates and trusts I believe always counted towards wash sales.

 

Including dependents is just stupid.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...