ultimax
Returning Member

Captail gains losses and Wash Sale Rule questions

So here are a couple of questions related to capital gains losses for the sake of tax deductions. Also some questions in regards to wash sale rules. Thanks for the help in clarifying some of this for me.

 

Question 1a:

Say I bought 100 shares of stock A. I then sold all of it the next day at a loss. I can then deduct the loss as capital gains losses (up to annual limit)?  Is this correct that if I sold all of it, how long I held it for doesn't matter in regards to capital gain losses?

 

1b. Same situation as 1a (100 shares of stock A). If I sell half of stock A (50 shares, then hold on to the other half). Then I sell the rest of it a few days later. Both sales are for losses and happen before 30 days have passed after buying A. Is it correct that both sales can be declared as capital gains losses or does one of them trigger wash sale rules?

 

Question 2:

Say I buy 100 shares of stock A on day 1. On day 4, I bought an additional 200 shares of the same stock.

 

2a. If on day 7, I sell all 300 shares at a loss, can I deduct the entire loss as capital gains or would any of it trigger wash sale rules and be disallowed?

 

2b. If wash sale rules are being triggered for 2a, would waiting till day 35 to sell all of it at a loss lead to regular captial loss deductions and not be counted as wash sale disallowed?

 

2c. If I sold a portion of the 300 shares before day 35, i assume it counts as a wash sale?

 

2d. If after day 35, I sold part of the 300 shares, does that count as a wash sale?

ThomasM125
Expert Alumni

Investors & landlords

If you hold the stock for less than one year, you have a short term capital loss that is taxed at ordinary tax rates, as opposed to capital gain tax rates.

 

You only have a wash sale if you buy the same or similar stock back within 30 days of when you sold it. Otherwise it doesn't matter what you do with the proceeds, the loss will be deductible, up to the annual limit of $3,000.

 

 

**Say "Thanks" by clicking the thumb icon in a post
**Mark the post that answers your question by clicking on "Mark as Best Answer"

Investors & landlords

Question 1a:

Say I bought 100 shares of stock A. I then sold all of it the next day at a loss. I can then deduct the loss as capital gains losses (up to annual limit)? Is this correct that if I sold all of it, how long I held it for doesn't matter in regards to capital gain losses?

 

if you have not repurchased replacement shares 30 days before or after the sale, the loss is reportable.  it is a short-term capital loss.  all short-term gains and losses must be netted. the same applies for long-term. 

if both types are losses - then you have a maximum of $3,000 in deductible S-T capital losses

if there are net s-t losses and net l-t gains they too must be netted. if net L-T gains exceed net s-t losses you have a net L-t gain otherwise a net S-t loss limited to $3,000 

if there are net s-t gains and net l-t losses - again they must be netted. if net S-t gains exceed net l-t losses you have net you have a net s-t gain otherwise a net l-t loss limited to $3,000

if there are s-t gains 

 

 

 

1b. Same situation as 1a (100 shares of stock A). If I sell half of stock A (50 shares, then hold on to the other half). Then I sell the rest of it a few days later. Both sales are for losses and happen before 30 days have passed after buying A. Is it correct that both sales can be declared as capital gains losses or does one of them trigger wash sale rules?

 

as presented both losses would be deductible. there would be no wash sales assuming no "replacement" shares were purchased 30 days before or after each sale

 

 

Question 2:

Say I buy 100 shares of stock A on day 1. On day 4, I bought an additional 200 shares of the same stock.

 

2a. If on day 7, I sell all 300 shares at a loss, can I deduct the entire loss as capital gains or would any of it trigger wash sale rules and be disallowed?

 

the loss on the 300 shares would be deductible assuming no replacement shares are purchases 30 days before or after the date of sale 

 

2b. If wash sale rules are being triggered for 2a, would waiting till day 35 to sell all of it at a loss lead to regular captial loss deductions and not be counted as wash sale disallowed?

 

there is no wash sale for 2a

 

2c. If I sold a portion of the 300 shares before day 35, i assume it counts as a wash sale?

 

nope no wash sale

 

2d. If after day 35, I sold part of the 300 shares, does that count as a wash sale?

 

nope no was sale

 

 

here's an example of a wash sale. on 2/1/2021 buy 100 shares.  on 2/15/2021 sell 50 shares at a loss.

at this point, there is no wash sale.  buy 25 shares on 3/6/2021,  there is  wash sale but only on 25 of the 50 shares sold. on 2/15/2021.   but another 25 shares  on 3/18/2021 no wash sale on the other 25 shares sold on 2/15/2021 becuase the purchase is outside the 30 day window 

ultimax
Returning Member

Investors & landlords

Thanks for the clarification, I think I understand the part about buying something identical after the sale within 30 days.  But I am confused about the part where it also says the wash sale occurs up to 30 days before the sale. 

 

"The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a "substantially identical" stock or security, or acquires a contract or option to do so."

 

In my example 2, If I sold some of my shares before the 30 days, doesn't the before clause trigger since there was 2 separate buys of the same stock?

Investors & landlords

you can't buy the stock, in anticipation of taking a loss soon on a prior purchase. Thus, the before and after time-window.

 

Also,  once your activity triggers a wash sale, that wash sale is "on the books", you can't get rid of it by doing any other thing.

Investors & landlords

purchase before sale where wash sale causes a loss.   here's are examples.

buy 100 shares of X on 2/5,    buy 100 shares of X on 3/1. on 3/2. you tell your broker to sell the lot purchase on 3/1 which results in a loss. the lot purchased on 2/5 is within the 30 day window of the 3/1 sale.  result the 3/1 sale is a wash sale and the disallowed loss gets add to the tax cost basis of the 2/5 shares.

 

buy 100 x on 5/5. buy 100 of y on 5/6.  sell the 100 y on 5/8  at a loss.  x and y are substantially identical securities (don't ask how this is determined there is just too many possibilities). result you have a wash sale.

 

you can also have a wash sale if you sell securities at a loss in a taxable account and within that 30 day window purchase substantially identical securities in your or your spouse's retirement account. the reverse is not true - loss on sale in retirement a/c while purchase in a taxable a/c has no tax effect on either account.  

 

the worse part in this situation the loss does not get added to the basis of the stock in the retirement a/c.  such an action would be meaningless.