Use ETFs to Dodge Tax-Loss Rules

Ater 30 days, you can choose to buy back some or all of your Wal-Mart position and sell the ETF.

Dan Dolan, an ETF specialist, says investors also can use this strategy to take a loss in a open-end mutual fund or closed-end fund while maintaining exposure to a particular sector. For example, if you are holding a technology fund that is currently underwater, you can sell the fund, realize the loss and buy a tech ETF like the Technology Select SPDR(XLK Quote) to stay exposed to the sector.

Strategy 2: Swapping One ETF for Another

Paul Mazzilli, an ETF strategist at Morgan Stanley, says investors also can swap sector ETFs "if they have similar -- but not exactly the same --- holdings, and are based on different indexes."

Again, let's use actual securities for a hypothetical example. This means that investors staring at unrealized losses in the iShares Dow Jones US Healthcare ETF(IYH Quote) can switch into the Vanguard Healthcare Viper(VHT Quote) or the Healthcare Select SPDR(XLV Quote) for 30 days and still comply with the wash-sale rule.

Mazzilli says the swap is kosher under the wash-sale rule because each ETF corresponds to a different index. The Dow Jones Healthcare ETF tracks the performance of the Dow Jones U.S. Healthcare Sector Index; the Vanguard ETF follows the MSCI U.S. Investable Market Health Care Index; and the Select Spider tracks the health care components of the S&P 500.