Hi, looking for advice on a wash sale scenario:
The IRS instructions and many sites describe replacement shares being bought within 30 days before or after the wash sale date, but examples always show the simpler 'after' case.
I have wash sales where the same security was purchased (and sold for a gain) less than 30 days before. It seems like adding the loss to the cost basis of earlier purchases only makes sense if you're still holding those shares at the time of the wash sale. Otherwise, it seems to violate the intent of the rule - to make you recognize gains immediately but defer losses if you rapidly trade out and back in. You could end up with a reverse chaining effect - turning earlier gains into losses, which seems pretty unlikely to be the intent.
Example:
Lot 1: 6/1/20 - Bought 100 shares for $1000, sold them on 6/5 for $1100 ($100 gain)
Lot 2: 6/6/20 - Bought 100 shares for $1100, sold them on 6/20 for $900 ($200 loss)
Lot 3: 6/15/20 - Bought 100 shares for $1200
So it seems like after selling Lot 2 you should ignore Lot 1 and apply the $200 loss to cost basis of Lot 3.
But if you still held Lot 1 on 6/20, you would apply the $200 loss to Lot 1.
Can anyone verify the correct way to handle this? Thanks!
