Back office vendor PFPC Inc. is launching a new program that allows mutual funds to automatically process wash sales of securities, or sales of securities that the fund then repurchases within a 30-day period, the company announced.
The Internal Revenue System disallows any capital loss deduction when an investor or a fund repurchases the same security within 30 days. Calculating and processing wash sales is a "time consuming and labor intensive" effort, said Richard Keyes, senior tax director for PFPC.
PFPCs online product will automatically alert equity mutual funds when wash sales occur, match the wash sale with the repurchased security, disallow a capital loss for tax purposes, recalculate the tax bases for remaining security positions and adjust the purchased securitys holding period, the company said.
The program will also factor in taxable and nontaxable mergers and spin-offs, tender offers, stock dividends and splits.