E*TRADE and all other US brokers are required by the IRS to account for wash sales. the broker is supposed to add the disallowed loss to the basis of the shares that caused the wash sale. when you sell those shares since your basis has been increased the wash sale loss is included in the net gain or loss that is reported. example: buy shares for $7 that cause a wash sale loss of $2. your basis is now $9. sell for $10 you now have a net $1 gain. sell for $8 you now have a net $1 loss. holding period of the wash sale shares tacks on to the replacement shares so a short-term wash sale loss can turn into long-term if the replacement shares are held long enough
