If you believe that you no longer have a wash sale and that you should be allowed to now use the unallowed loss, due to the stock being completely sold or disposed of as of December 31st, and you are not sure which stocks were affected by the unallowed wash sale loss previously, then you could enter one sale for this.
The selling price would be zero and the cost basis would be the amount of your previous unallowed wash sale loss. As you indicated, under a potential review you would have to show the transactions that led to this decision. For your convenience below you can see the wash sale rules.
Keep in mind that not all states follow the same federal rules in relationship to wash sales.
Wash Sale Rule Defined:
- A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
- It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
- The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.
Affect on Cost Basis:
- The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
- When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.
Be sure to keep good records going forward so that you know when to add those losses for future sales.
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