General - TLH Q&A
Q: What is the Tax Loss Harvester (TLH) tool?
A: The SMArtX Tax Loss Harvester helps advisors identify opportunities to realize short- and long-term capital losses that can be used to offset capital gains or ordinary income, while monitoring for wash sales across related accounts.
Q: Which accounts are included in wash sale monitoring?
A: Wash sale monitoring applies across all accounts within the same Account Group (tax household). When a security is sold at a loss in one account, exclusions are applied across the entire Account Group.
Q: Can an account belong to more than one Account Group?
A: No. An account can only be assigned to one Account Group at a time.
Account Groups - TLH Q&A
Q: What is an Account Group?
A: An Account Group represents a tax household. It combines one or more accounts that share the same tax goals and filing status and allows SMArtX to monitor for wash sales across those accounts.
Q: Can an Account Group contain just one account?
A: Yes. An Account Group can contain a single account or multiple accounts.
Q: What happens if I need to move an account to a different Account Group?
A: The account must be removed from its existing Account Group before it can be added to another group.
Harvest Rules - TLH Q&A
Q: What is a Harvest Rule?
A: A Harvest Rule defines the criteria used to identify harvesting opportunities, such as minimum dollar or percentage gain/loss thresholds and whether the rule applies at the position level, lot level, or both.
Q: Can a single Harvest Rule be used across multiple Account Groups?
A: Yes. Once created, a Harvest Rule can be applied to any number of Account Groups.
Q: Should I use dollar-based or percentage-based rules?
A: This depends on your strategy. Dollar-based rules provide more precise tax targeting, while percentage-based rules may be better suited for portfolios of varying sizes. Many advisors use a combination depending on client objectives.
Custodians & VSPs - TLH Q&A
Q: What is Versus Specific Purchase (VSP)?
A: VSP refers to a custodian’s ability to execute trades against specific tax lots, regardless of the account’s default tax lot relief method.
Q: Why does VSP matter for tax-loss harvesting?
A: When a custodian supports VSP, advisors can selectively harvest specific loss lots without triggering the sale of gain lots. When VSP is not supported, trades are executed based on the custodian’s default tax lot methodology (such as FIFO).
Q: How do I know if my custodian supports VSP?
A: SMArtX identifies custodians as VSP or non-VSP within the platform. If you are unsure, confirm directly with your custodian.
Q: What type of Harvest Rule should I use for a non-VSP custodian?
A: For non-VSP custodians, Harvest Rules should generally be applied at the position level, not the lot level. This helps avoid unintentionally realizing gains before losses.
Q: What happens if I apply a lot-level rule to a non-VSP custodian?
A: The platform may display only the loss lots that meet the rule, but the custodian may still sell gain lots first based on its tax lot relief method. This can result in a different realized gain/loss than what is displayed in SMArtX.
Harvesting Opportunities - TLH Q&A
Q: Why don’t I see all lots for a position?
A: Visibility of lots depends on whether the custodian supports VSP and how the Harvest Rule is configured. Non-VSP custodians may not display all lots when lot-level rules are used.
Q: Can I partially harvest a lot?
A: Yes. For custodians that support VSP, advisors can harvest an entire lot or specify a partial amount. For non-VSP custodians, quantities are entered at the position level.
Q: Can I harvest positions across multiple accounts at once?
A: Yes. Harvesting opportunities are grouped by symbol and then broken out by account within an Account Group.
Replacement Instructions & Wash Sales -TLH Q&A
Q: What replacement options do I have when harvesting?
A: Advisors can choose to either hold the proceeds in cash or purchase a replacement security for each harvested symbol.
Q: How does SMArtX prevent wash sales?
A: When a security is harvested, SMArtX applies an exclusion across the Account Group that prevents the same or substantially identical security from being repurchased for 31 days.
Q: What is the “Reopen After Wash Sale Period” option?
A: This option automatically removes the exclusion 31 days after the harvest is executed, allowing the position to be repurchased or realigned.
Q: What happens if I don’t select “Reopen After Wash Sale Period”?
A: The replacement instruction and exclusion remain in place until the advisor manually reverses the harvest or removes the exclusion.
Q: What happens when I reopen a position harvested from a model?
A: When the wash sale period expires, exclusions are removed and the account will automatically trade to realign with the model.
Q: What happens when I reopen a position that is advisor-managed?
A: The advisor must submit the account through the rebalancer to realign the portfolio with its target allocations.
Reviewing Harvest Rules - TLH Q&A
Q: Where can I view my harvest activity?
A: All current and historical harvest requests can be viewed on the View Harvest Requests page, accessible from the main Tax Loss Harvesting screen.
Q: What information is available in a harvest request?
A: Each request shows the harvested securities, replacement instructions, estimated tax impact, submission status, and wash sale expiration details.
Q: Why should I regularly review harvest requests?
A: Reviewing harvest requests helps ensure that exclusions are removed when appropriate and that replacement instructions align with the advisor’s ongoing portfolio strategy.