Comments on: Converting Mutual Funds Into Exchange Traded Funds (ETFs) Without Incurring Taxes

By: mwarden

mwarden — Sat, 20 Jun 2009 02:25:05 +0000

@Frank,

Buddy, swapping out for a different fund tracking the same index and then claiming the harvested loss is not very wise. You would be purchasing another equity that is not substantially different, and that is generally believed to trigger a wash sale (which, incidentally, is why going from the mutual fund to the ETF is not a taxable event).

http://www.bogleheads.org/wiki....._identical

I would suggest moving at least temporarily (31 days) into a fund tracking a different index. Example: sell SPY and buy VTI.

By: Nickel

Nickel — Fri, 19 Jun 2009 19:34:43 +0000

Frank: Very true that people are more likely to be harvesting losses at this point, but this is still useful information going forward (at least to me).

By: Frank Curmudgeon

Frank Curmudgeon — Fri, 19 Jun 2009 19:29:48 +0000

Of course, with the market down the tax event you are avoiding is likely the realization of a loss, which doesn’t particularly make sense. If you have a loss in an index fund it may make sense to swap it for another fund that tracks the same index, banking the loss for future use.