Wash sales does not apply to ETFs?

Discussion in 'ETFs' started by bat1, Apr 13, 2013.

  1. bat1


    Wash sales only apply to stocks?

    So, Futures, ETF's, options no wash sales?

    This is what I'm hearing is it true?
  2. It's not true. In general wash sales apply to stocks, options, and most ETFs, but not futures.

  3. That is NOT true.

    Wash sale rules DO APPLY to ETFs, options, and single stock futures. In the eyes of the IRS (and those are the only eyes that matter come taxtime) these instruments are the same as "stocks" and ARE subject to wash sale rules.

    Wash sale rules DO NOT APPLY to futures (not to be confused with single stock futures) and options on futures.

    Tax rates MAY be different for certain ETFs and/or options on ETFs depending on the component make up of the of the instrument or underlying asset, but that is the tax rate, which has nothing to with the applicability of wash sale rules to that instrument. And of course, tax rates are different for futures and derivatives on futures. Again not to be confused with single stock futures.

    Trade On!
  4. They apply to any equity, including ETFs, only index futures and commodities futures are safe from wash sale rules.
  5. Only BROAD BASED INDEXs, section 1256 futures contracts traded on a recognized contract market exchange, including options on this underlying index.

    NARROW BASED INDEX, including options, is treated as stock.
  6. What about an ETF that is based on section 1256 futures contracts, like UVXY? I traded UVXY last year, and received tax documentation including a K-1 and instructions saying I should fill out Form 6781 instead of Form 8949. I believe that means I don't have to worry about wash sales with UVXY - I think you only have to worry about wash sales for instruments that you put on Form 8949. But I could be wrong about that.
  7. sprstpd


    Yes, UVXY provides a K-1, but that does not mean you don't have to report your paired buy/sells of it on Form 8949. The K-1 is independent of Form 8949 and does not replace it. I am pretty sure you can have wash sales involving UVXY. Please show me some tax code if I am wrong.
  8. This came with my UVXY tax documents:


    It says you are supposed to put some of your gain/loss onto line 5 of Schedule D and other gain/loss onto Form 6781 (which would then go on line 4 of Schedule D). It doesn't mention anything about Form 8949, and I don't think you would fill in Form 8949 in addition to lines 4 and 5 on Schedule D, otherwise you'd be claiming twice your gain/loss.

    The problem for me is that the K-1 they sent me has no information on it. See here:


    I called ProShares and they said they will not generate a K-1 for anyone who had short sales of UVXY. I did go long and short UVXY multiple times last year.

    I am going to let a CPA figure all this out.
  9. If it an ETF it is considered an equity in the eyes of the IRS for purposes of the wash sale rule. The cap gains tax rate MAY differ from an equity however, depending on the components of the ETF and how the K1 is reported. The cap gains tax rate is independent and separate from the wash sale rule.

    A K1 has NOTHING to do with how many or when YOU traded. What it does mean is that you were a holder of the ETF on the record date and are liable for taxes on any income, deductions, credits, gains, and losses of the ETF, as reported on the K1. The K1 is all about the EFT as an entity. IT HAS ABSOLUTELY NOTHING TO DO WITH **YOUR** INDIVIDUAL TRADING GAINS OR LOSSES OR HOLDING PERIODS.

    If it an ETF it is considered an equity in the eyes of the IRS for purposes of the wash sale rule

    Trade On!
  10. sprstpd


    You are considered a limited partner of that fund and they are reporting to you your share of the partnership's gains and losses on that Form K-1. You point out that line that needs to be transferred to Schedule D, but that is just capital gains from the partnership and has nothing to do with where you bought and sold the underlying ETF. You need to report that also. So it isn't double taxation - it's taxing two completely different things.

    Most of the time, Tax Package Support K-1s cannot handle short sales on K-1s. However, Partner Data Link (another big provider of K-1s) does handle short sales properly. To get Tax Package Support to handle them properly, just redate all your covers to be the same date as when you went short. You need to avoid being short overnight at any point in time, otherwise Tax Package Support's "brilliant" computer algorithm core dumps. It is possible that by being long overnight one of these K-1s that you will receive non-zero entries on the K-1 that have to be reported on your tax return (follow the enclosed instructions - i.e., the first scanned image in your post). So getting a valid K-1 is preferrable for tax correctness.
    #10     Apr 13, 2013