Stocks-Wash Sale

[eddie57]

What is the name of your state? Texas

What is a true wash sale? Does the repurchase has to be the same number of shares of the same stock?

I purchased 200 shares of xyz on March 1, 2006, and sold them 1 day later at a loss. I then purchased 250 shares of xyz 3 weeks later. Would this be considered a "Wash Sale" in the eyes of the IRS? Or does the share amount have to be the same?

TIA

Eddie

 

[abezon]

A wash sale is when you sell shares at a loss & purchase 'substantially similar' shares withing 30 days before or after that sale. Substantially similar means same company, same class of shares.

A partial wash sale occurs if you sell 500 shares at a loss, then buy 200 shares 30 days later. In that case, 200/500ths of the loss (40%) would be disallowed as a wash sale. 60% of the loss would be allowed. This gets really tedious when you have a mutual fund with reinvested montly dividends -- you'll get a $600 loss, with $1.20 being disallowed as a wash sale. My software forces me to split the sale into a $599 loss & a $1 loss (disallowed).

In your case, since you purchased more shares than you sold at a loss, the entire loss is disallowed as a wash sale.

You can avoid the entire wash sale problem if you liquidate xyz before Dec 31 & do not purchase any xyz within 30 days before or after that sale. That's usually the first thing I check for when I see that the wash sale rules have been triggered -- did my client cash out the wash shares before the end of the year? If so, I ignore the wash sale nonsense & just enter both sales normally. Technically wrong, but all the IRS can say is I should have arrived at the same net gain/loss by another means, so who cares?

Don't forget that wash sale rules can be triggered by a purchase in one year & a sale in another year.

 

[eddie57]

Wash Sale Time Window

So a wash sale can occur any time during the year. Is that correct? Also, What if I were to do the same thing with the same stock 4 consecutive times all with losses and all less than 30 days of each other. Would they all be wash sales? I just want to make sure I get this clear.

You said "In your case, since you purchased more shares than you sold at a loss, the entire loss is disallowed as a wash sale." My question is: will I be able to take the loss on the 250 shares of xyz when I sell them?

Thanks

Eddie

 

[abezon]

Wash sales can be consecutive. And yes, you'll take the 200 share disallowed loss when you sell the 250 shares you now hold.

 

[eddie57]

Thanks

Thank you for your replies on my questions and for donating your time to this forum.

Eddie

 

[donroro75]

Wash Sales help

I purchase 130 mshares of FNM at 12.16
130 sahres of FNM at 7.696
1.1774 dividends reinvestment
I sold 261.1774 shares at $1
and bought 300 shares of the same stock at 1.018 on the same day i sold the 261.1774 shares. Is this a wash sales? Can claim the loss on my taxes?

 

[ShyCat]

Yes, and no, in that order.

 

[davew128]

Don't resurrect old threads.