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.