A brokerage knows when a wash sale occurs, they do not know when it's over. Likewise you must know your wash sales so that you know when you can use it and when you a loss is not allowed.
The wash sale disallowed is not added to the net gain/loss rather it is adjusted and suspended so that it does not affect the total gain or loss for any pending wash sales. Likewise you can have a wash sale during a tax year, and then fully dispose of the stock in the same year which would eliminate the wash sale rule for the final sale of the same stock.
It's up to you to know when you no longer have to consider the wash sale rule.
Example:
X bought 5 shares of ZZZ stock, at $5 per share, then sold it for $3 per share, however immediately before the original 3 shares were sold, X bought another 5 shares at $5.00 per share.
$25 for the first block of shares
15 is the proceeds creating a $10 loss
The $10 loss is now added to the cost of the new shares for an overall cost basis of $35.
Once the second block of shares is sold (5 shares with cost basis of $30) without any repurchase with in the 60 day window (30 days before or 30 days after the sale), and if they are sold at a loss, then no wash sale exists on the sale, and a loss is allowed.
You do not have to enter 4000 transactions, you can combine the wash sales into one entry, once you decide the transactions that are still open. Then include your statement with the detail.
Please add more detail if you need further assistance and one of our tax experts can help.
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