Investors who sell securities at a loss won’t be able to claim a capital loss if they immediately buy back the same items. Instead, you can buy a proxy for the security that’s been sold. You can buy a similar but not identical stock in an attempt for minimal portfolio impact.
If you who take a loss on one bank stock, you might buy another bank stock, expecting performance to be similar. After 31 days, you can go back to the original position, if that seems desirable.
Mutual fund investors can sell one large-cap growth fund and immediately buy another, assuming that performance won’t differ greatly. Even in funds, though, some issues aren’t clear. Can you sell one S&P 500 index fund, for example, and buy another one, perhaps an exchange-traded fund?
The IRS hasn’t specifically answered that question. Some experts assert that you can’t take a tax loss by going right back into a fund that tracks the same index. You’re better off going into another index that’s closely correlated: you might sell an S&P 500 fund and buy an S&P 100 fund.
