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New IRS Steerage Gives Cash Market Fund Wash Sale Aid


The Inside Income Service has issued steering to cut back undue tax compliance burdens ensuing from cash market fund reforms finalized in July by the Securities and Alternate Fee.

The IRS steering “permits redeeming cash market fund shareholders to right away take losses attributable to liquidity charges,” Katie Sunderland, affiliate normal counsel on the Funding Firm Institute, a mutual fund commerce group, informed ThinkAdvisor on Monday.

The IRS exemption “from the wash sale rule is well timed because it takes impact on [Oct. 2] the identical date because the SEC’s new liquidity charge necessities,” Sunderland mentioned. “The IRS steering thus relieves on a regular basis traders from important unwarranted tax reporting complexities that in any other case would come up from the brand new SEC rule.”

For all cash market funds, the SEC elevated the every day liquid asset minimal to 25% of whole property from 10% and the weekly liquid asset minimal to 50% of whole property from 30%.

Accordingly, the IRS states in its new steering that it “won’t deal with as a part of a wash sale a redemption of a share” in any cash market mutual fund.

Because the ICI defined, “any shareholder who redeems shares of a fund and reinvests dividends each month could have a wash sale — absent an exemption — any time the redemption is at a loss (because of the 30 days earlier than/after facet of the wash sale rule).”

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