Reply To: Monthly vesting RSUs, sell-to-cover wash sale

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#77400
Kaye Thomas
Moderator

There have been no further developments that would change my opinion. Let me be clear.

The Internal Revenue Code says the wash sale rule applies to a sale of stock or securities at a loss if the taxpayer has “acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law)” substantially identical stock or securities within the wash sale period. The wash sale rule doesn’t apply if the stock was acquired in some way other than by purchase or taxable exchange.

The IRS has published guidance indicating that its position would be that stock received as compensation should be considered acquired as indicated in the quoted language. This is plainly incorrect. The stock is not acquired by purchase. It is also not acquired by an exchange of the type contemplated in the statutory language (one in which gain or loss is recognized). What’s more, the purpose of the wash sale rule, preventing artificial tax losses when the taxpayer has not changed his or her stock position, does not apply in this situation.

Therefore, although I acknowledge the possibility (which I believe is a remote possibility) that the IRS may take a contrary position, the law clearly supports my position that acquisition of shares through vesting of RSUs should be disregarded in applying the wash sale rule.