IRS Addresses Money Market Fund Exception to Wash Sale Rule, Rev. Proc. 2023-35

The IRS issued guidance providing that a redemption of money market fund (MMF) shares will not be treated as part of a wash sale under Code Sec. 1091. In response to final rules adopted by the Securities and Exchange Commission in July 2023, the revenue procedure amplifies Rev. Proc. 2014-45 and extends its wash sale relief to redemptions of shares in MMFs that maintain fixed share prices.

Wash Sale Relief

The guidance applies to a redemption of one or more shares in any MMF (including stable-NAV MMFs). If such redemption results in a loss, the IRS will not treat the redemption as part of a wash sale. Therefore, Code Sec. 1091(a) will not disallow the deduction for the resulting loss in the year realized and Code Sec. 1091(d) will not cause the basis of any property to be determined by reference to the basis of the redeemed shares.

Effect on Other Documents

Rev. Proc. 2014-45 is amplified and superseded for redemptions of shares in MMFs after October 2, 2023.

Rev. Proc. 2023-35