How to know if two ETFs are 'substantially identical' according to wash sale rules?
"It sounds like this is an entirely unsettled question, unfortunately.  In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no overlap certainly should not be considered such by a reasonable interpretation of the rule. This article on Kitces goes into some detail on the topic.  A few specifics. First, Former publication 564 explains: Ordinarily, shares issued by one mutual fund are not considered to be substantially identical to shares issued by another mutual fund. Of course, what ""ordinarily"" means is unspecified (and this is no longer a current publication, so, who knows). The Kitces article goes on to explain that the IRS hasn't really gone after wash sales for mutual funds: Over the years, the IRS has not pursued wash sale abuses against mutual funds, perhaps because it just wasn’t very feasible to crack down on them, or perhaps because it just wasn’t perceived as that big of an abuse. After all, while the rules might allow you to loss-harvest a particular stock you couldn’t have otherwise, it also limits you from harvesting ANY losses if the overall fund is up in the aggregate, since losses on individual stocks can’t pass through to the mutual fund shareholders. But then goes to explain about ETFs being very different: sell SPY, buy IVV or VTI, and you're basically buying/selling the identical thing (99% or so correlation in stocks owned).   The recommendation by the article is to look at the correlation in owned stocks, and stay away from things over 95%; that seems reasonable in my book as well. Ultimately, there will no doubt be a large number of “grey” and murky situations, but I suspect that until the IRS provides better guidance (or Congress rewrites/updates the wash sale rules altogether!), in the near term the easiest “red flag” warning is simply to look at the correlation between the original investment being loss-harvested, and the replacement security; at correlations above 0.95, and especially at 0.99+, it’s difficult to argue that the securities are not ”substantially identical” to each other in performance. Basically - use common sense, and don't do anything you think would be hard to defend in an audit, but otherwise you should be okay." "Nobody knows for sure what ""substantially identical"" means because the IRS hasn't officially defined it. Until they do so, it would come down to the decision of an auditor or a tax court. The rule of thumb that I have always heard is if the funds track the same index, they are probably substantially identical. I think most people wouldn't consider any pair of AGG, CMF, and NYF to be substantially identical, so you should be safe with your tax-loss harvesting strategy."
"My knowledge relates to ETFs only. By definition, an ETF's total assets can increase or decrease based upon how many shares are issued or redeemed.  If somebody sells shares back to the ETF provider (rather than somebody else on market) then the underlying assets need to be sold, and vice-versa for purchasing from the ETF provider.  ETFs also allow redemptions too in addition to this. For an ETF, to determine its total assets, you need to you need to analyze the Total Shares on Issue multipled by the Net Asset Value.  ETFs are required to report shares outstanding and NAV on a daily basis. ""Total assets"" is probably more a function of marketing rather than ""demand"" and this is why most funds report on a net-asset-value-per-share basis. Some sites report on ""Net Inflows"" is basically the net change in shares outstanding multiplied by the ETF price. If you want to see this plotted over time you can use a such as: http://www.etf.com/etfanalytics/etf-fund-flows-tool which allows you to see this as a ""net flows"" on a date range basis." It really depends on the hedge fund, my hedge fund gives back all rebates for routes that are public knowledge back to the client. Also the rebate is based on the route, not the stock, so it may not offset all expenses on each ETFs. Most of the BATS IEX and other routes have public websites where you can get the infos on what are the rebates for each. I wouldn't get too caught up with this. Doesn't sound like this is even stock reconciliation, more ensuring the cash you've received for dividends &amp; other corporate actions agrees to your expected entitlements and if not raising claims etc. You could look up the P/E of an equivalent ETF, or break the ETF into components and look those up. Each index has its own methodology, usually weighted by market cap.  See here: http://www.amex.com/etf/prodInf/EtAllhold.jsp?Product_Symbol=DIA In addition to the adjustment type in NL7's answer, there are a host of others.  If there are any adjustments, form 8949 is required, if not, the gains can be separated into short and long-term and added together to be entered on Schedule D.  Anything requiring an adjustment code in column F of the 8949 requires an entry in column G.   Some other example entries for column F include: (see the 8949 instructions for a complete list) **A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. (from Pub17) Like an S&amp;P 500 ETF?  So you're getting in some cash inflow each day, cash outflows each day.  And you have to buy and sell 500 different stocks, at the same time, in order for your total fund assets to match the S&amp;P 500 index proportions, as much as possible.  At any given time, the prices you get from the purchase/sale of stock is probably going to be somewhat different than the theoretical amounts you are supposed to get to match, so it's quite a tangle.  This is my understanding of things.  Some funds are simpler - a Dow 30 fund only has 30 stocks to balance out.  Maybe that's easier, or maybe it's harder because one wonky trade makes a bigger difference?  I'm not sure this is how it really operates.  The closest I've gotten is a team that has submitted products for indexing, and attempted to develop funds from those indexes.  Turns out finding the $25-50 million of initial investments isn't as easy as anyone would think. The key two things to consider when looking at similar/identical ETFs is the typical (or 'indicative') spread, and the trading volume and size of the ETF. Just like regular stocks, thinly traded ETF's often have quite large spreads between buy and sell: in the 1.5-2%+ range in some cases. This is a huge drain if you make a lot of transactions and can easily be a much larger concern than a relatively trivial difference in ongoing charges depending on your exact expected trading frequency. Poor spreads are also generally related to a lack of liquidity, and illiquid assets are usually the first to become heavily disconnected from the underlying in cases where the authorized participants (APs) face issues. In general with stock ETFs that trade very liquid markets this has historically not been much of an issue, as the creation/redemption mechanism on these types of assets is pretty robust: it's consequences on typical spread is much more important for the average retail investor. On point #3, no, this would create an arbitrage which an authorized participant would quickly take advantage of. Worth reading up about the creation and redemption mechanism (here is a good place to start) to understand the exact way this happens in ETFs as it's very key to how they work. They can rebalance and often times at a random manager's discretion. ETF's are just funds, and funds all have their own conditions, read the prospectus, thats the only source of truth. You can calculate the fully diluted shares by comparing EPS vs diluted (adjusted) EPS as reported in 10K. I don't believe they report the number directly, but it is a trivial math exercise to reach it. The do report outstanding common stock (basis for EPS). "Generally, ETFs work on the basis that there exists a pair of values that can be taken at any moment in time: A Net Asset Value of each share in the fund and a trading market price of each share in the fund.  It may help to picture these in baskets of about 50,000 shares for the creation/redemption process. If the NAV is greater than the market price, then arbitrageurs will buy up shares at the market price and do an ""in-kind"" transaction that will be worth the NAV value that the arbitrageurs could turn around and sell for an immediate profit. If the market price is greater than the NAV, then the arbitrageurs will buy up the underlying securities that can be exchanged ""in-kind"" for shares in the fund that can then be sold on the market for an immediate profit. What is the ETF Creation/Redemption Mechanism? would be a source on this though I imagine there are others. Now, in the case of VXX, there is something to be said for how much trading is being done and what impact this can have. From a July 8, 2013 Yahoo Finance article: At big option trade in the iPath S&P 500 VIX Short-Term Futures Note   is looking for another jump in volatility.  More than 250,000 VXX options have already traded, twice its daily   average over the last month. optionMONSTER systems show that a trader   bought 13,298 August 26 calls for the ask price of $0.24 in volume   that was 6 times the strike's previous open interest, clearly   indicating new activity. Now the total returns of the ETF are a combination of changes in share price plus what happens with the distributions which could be held as cash or reinvested to purchase more shares." It's an SEC standard for certain items. It is NOT indicative of fair market value. It could be useful to compare companies to each other, but again, would not indicate intrinsic value.  Does it make sense, for example, to discount Saudi Aramco at the same exact rate as BP or Exxon? "According to Wikipedia this is still a wash sale: In the USA wash sale rules are codified in ""26 USC § 1091 - Loss from   wash sales of stock or securities."" Under Section 1091, a wash sale occurs when a taxpayer sells or trades   stock or securities at a loss, and within 30 days before or after the   sale:" @BlackJack does a good answer of addressing the gains and when you are taxed on them and at what kind of rate. Money held in a brokerage account will usually be in a money-market fund, so you would own taxes on the interest it earned.   There is one important consideration that must be understood for capitol Losses.  This is called the Wash Sale Rule.  This rule comes into affect if you sell a stock at a LOSS, and buy shares of the same stock within 30 days (before or after) the sale.  A common tactic used to minimize taxes paid is to 'capture losses' when they occur, since these can be used to offset gains and lower your taxes.  This is normally done by selling a stock in which you have a LOSS, and then either buying another similar stock, or waiting and buying back the stock you sold.   However, if you are intending to buy back the same stock, you must not 'trigger' the Wash Sale Rule or you are forbidden to take the loss. Examples.  Lets presume you own 1000 shares of a stock and it's trading 25% below where you bought it, and you want to capture the loss to use on your taxes. This can be a very important consideration if trading index ETF's  if you have a loss in something like a S&P500 ETF, you would likely incur a wash sale if you sold it and bought a different S&P500 ETF from another company since they are effectively the same thing.  OTOH, if you sold an S&P500 ETF and bought something like a 'viper''total stock market' ETF it should be different enough to not trigger the wash sale rule.  If you are trying to minimize the taxes you pay on stocks, there are basically two rules to follow.  1) When a gain is involved, hold things at least a year before selling, if at all possible.  2) Capture losses when they occur and use to offset gains, but be sure not to trigger the wash sale rule when doing so. Brokerage->Brokerage 13-16 The loss from the previous purchase will be added to the cost basis of the security for the second purchase. Since you sold it at a loss again it would increase your losses. Your loss from the first sale will be disallowed. Your loss will be added to the cost basis of the next purchase. Your gains will be taxed on the total of the cost basis which will reduce your gains. Which you will taxed 'less'. Your gains will be taxed. Your loss is allowed. You will be taxed on both.  Wash Sales really only applies to losses. If you sell for gain, the tax man will be happy to take his share. From my understanding, it does not matter if it is IRA or Brokerage, the wash sale rule affects them all. Check this link: http://www.marketwatch.com/story/understanding-the-wash-sale-rules-2015-03-02 Re #2, consider an account at a credit union rather than a bank or brokerage firm. Whether you choose a savings account or a money market account, you're likely to get an account with lower fees (so it doesn't cost you money), and rates that are typically similar.