March 10, 2020
Wash your hands, not your loss sales.
With yesterday's big drop in the market, no doubt some investors are tempted to harvest some losses to offset capital gains they expect this year.
Be careful with that.
The tax law has "wash sale" rules that require you to stay out of an investment for thirty days on each side of the date you sell a loss investment. From IRS Publication 550:
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade,
Acquire a contract or option to buy substantially identical stock or securities, or
Acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.
Item #4 blocks taxpayers from taking a loss on a taxable account while buying the same investment in a tax-free vehicle.
GOP Considering All Options to Counter Coronavirus Effect - Jad Chamseddine, Tax Notes ($). "'Everything is on the table' when it comes to helping businesses and the economy in the face of the coronavirus, Senate Finance Committee Chair Chuck Grassley, R-Iowa, told reporters March 9. Grassley said he wouldn't rule out a payroll tax holiday or targeted tax relief for certain industries, but didn't go into specifics."
Grassley considering options for targeted tax relief over coronavirus- Naomi Jagoda, The Hill. "Democrats, however, have said that worker safety should be a priority over tax cuts for businesses."
After Coronavirus-Fueled Stock Market Drop, Trump Considers Payroll Tax Relief - Kelly Phillips Erb, Forbes.
Economists Split on Merits of Payroll Tax Cut to Bolster Economy - Jonathan Curry, Tax Notes ($).
I think Arnold Kling correctly notes how conventional measures may not work well in dealing with Coronavirus dislocation:
As for the economics of the crisis, I see it in terms of a PSST story. Many patterns of specialization and trade depend on globalization. The conventional wisdom seems to be that the central banks will be prominent actors, but I could not disagree more. I would suggest that instead of monitoring the Fed, one should watch the transportation hubs–especially ports–and manufacturing centers. To the extent that the attempts to contain the virus cause those places to be shut down, patterns of specialization and trade will be broken, and there won’t be anything that the Fed can do about it.
Maybe it comes down to a feeling they must do something, and as a payroll tax cut is something, they must cut payroll taxes.
Lesson From The Tax Court: New Contract Turns Deductible Travel Into Non-Deductible Commute - Bryan Camp, TaxProf Blog. "You see the problem: how do we distinguish between non-deductible commuting and deductible travel away from home?"
California LLC With No Business Activity Owes Annual Tax - Andrea Muse, Tax Notes ($). "A limited liability company is subject to the California LLC annual tax until it has filed a certificate of cancellation with the secretary of state, even if it has ceased doing business, the state office of tax appeals has held."
Tax Treatment of Meals and Entertainment - Roger McEowen, Agricultural Law and Taxation Blog. "But what about the cost of the two-week pack trip into the Teton Wilderness Area with clients and potential clients?"
Dear IRS, My Tax Mistake Was Not Willful, No Penalty? - Robert Wood, Forbes. "After all, taxes are complex, and mistakes happen. But the burden is on you to show that you acted reasonably."
Should You Stop Giving Money To Your College? - Peter Reilly, Forbes.
Time and tax deduction method changes - Kay Bell, Don't Mess With Taxes. No, there is no deduction for that lost hour.
Critics Argue The Property Tax Is Unfair. Do They Have A Point? - Tracy Gordon, TaxVox. "In sum, the property tax is a stable, adequate, and reliable revenue source but it also raises equity and transparency concerns."
Courts Defer Hearings, IRS Limits Travel Amid Virus Concerns - William Hoffman, Tax Notes ($) From the Tax Court announcement:
Fortunately, social distancing is my core competency.
This is a roundup of tax news and opinion. Any opinions expressed or implied are those of the author and not necessarily those of Eide Bailly. Opinions found in linked items are those of the authors of the linked item, not of your bloggers or of Eide Bailly. “$” means link may be behind a paywall. Items here do not constitute tax advice.