wash sale with leveraged ETF

Question

If a person sales regular ETF ( suppose QQQ) at a loss and buys a leveraged ETF on similar Index e.g TQQQ within 30 days, will the loss on QQQ be treated as wash sale ?

Answer 1

There's not a crystal clear definition of "substantially identical" securities, but I would strongly suspect that an ETF and a leveraged ETF, even on the same index, would not be considered "substantially identical". In fact, it is arguable that buying an ETF from a different provider that tracks the same index would avoid the wash-sale rules since the aim could be to pay less fees, have less tracking error, etc. (stocks would not apply because there is no practical difference between buying a stock from one broker versus another)

So you would probably be safe not reporting the sale as a wash sale and realizing your loss, but in the end it's up to the IRS to determine if your loss should be deferred.

(p.s. at worst, a wash sale would defer the loss until you sold the leveraged ETF, so if you did it in the same tax year it doesn't matter)

Answer 2

I don't think so. If you are worried about it, buy a similar leveraged ETF other than TQQQ or futures (/NQ, /MNQ).

Edit: Wash sale rules do not apply to futures. Since the OP has a taxable account, trading futures might be an alternative.

How Are Futures and Options Taxed?