The government hasn't really provided a definition of "substantially identical" for purposes of wash sales. Buying the exact same company is an identical security. Going from and S&P 500 index at one brokerage to another is a bit different. S&P 500 to a total stock market fund is quite different.
If S&P 500 index funds and similarly broadly defined funds from each brokerage house are available and deemed "different enough", it could significantly increase the money moves available before encountering a "required" wash sale.
I'm not familiar with the behind the scenes aspects of it, but it feels like there may be a clever solution out there that could augment some of the liquidity concerns you mentioned if you could batch the transactions together.
E.g. Alice has $1,000, Bob has $1,000, and Charlie has $2,000. They all have a transaction on the same day. Alice and Bob were on $Illiquid_Fund_A, Charlie is in $Illiquid_Fund_B. Alice and Bob trade with Charlie and everyone goes about their day.
If S&P 500 index funds and similarly broadly defined funds from each brokerage house are available and deemed "different enough", it could significantly increase the money moves available before encountering a "required" wash sale.
I'm not familiar with the behind the scenes aspects of it, but it feels like there may be a clever solution out there that could augment some of the liquidity concerns you mentioned if you could batch the transactions together.
E.g. Alice has $1,000, Bob has $1,000, and Charlie has $2,000. They all have a transaction on the same day. Alice and Bob were on $Illiquid_Fund_A, Charlie is in $Illiquid_Fund_B. Alice and Bob trade with Charlie and everyone goes about their day.