Investors & landlords

@Rick19744 - thanks for all the notes you provided. Certainly lots of details and everyone’s situation is different!

@jgr21 I only talked to one CPA and they did not think they could help me.  From my research I think there were only a few things of interest to my situation:

1. Check if your day trade buy and sell lots were matched up correctly (I use TD Ameritrade). On a typical day I make many round-trip trades, meaning I open a position and then completely close the position. You would think that regardless of a FIFO or LIFO tax lot method that when I completely close out a position that those shares would be matched with the corresponding opening trade, but they weren’t! It actually used my LIFO selection by taking the entire list of trades for the day and THEN matching them.  Turns out that my first buy of the day was being matched with the last sell of the day, even though I had completely closed out my position many times before then.  The effect of this is that instead of my normal small wins and small losses, I now have big wins and big losses (because the price moved from early in day to late in day so the buy/sell prices are now far from each other)…. and thus much higher tax bill and much higher wash sale.
2. A CPA can make a request to the IRS to allow you to use mark-to-market election even if you did not elect it in time. With luck maybe the IRS will agree…

My cost basis was way more than 3 mil but let me just paint the picture one more time with hypothetical example since some did not seem to understand.

Looking at only Winning trades- cost basis 1 mil, proceeds 2 mil. Net = 1 mil

Looking at only Losing trades- cost basis 1 mil, proceeds 0 mil. Net = -1 mil.

Now imagine all those losses are treated with wash-sale rule and you pay taxes on 1 mil even though your actual net profit was $0! That would be an infinite tax rate!!!

My original post was an exagerration. My actual scenario was that I actually made $100k but had to pay $200k because of wash sale rules (yay 200% tax!).  I’m rolling forward like $500k of capital gains losses indefinitely until I make that money back.  I used TaxAct software because it’s the only software I could find that allowed a number bigger than 10 mil (turbo tax and H&R Block don’t). I went ahead and paid the $200k because by paying it now instead of next year it will in effect be treating a lot of my income at a lower tax bracket (because I’ll likely make more in 2021 than 2020). I didn’t use the one CPA I talked to because he said his office has a policy against filing schedule C for traders and so I didn’t see the point in building a relationship with him. I am leaps and bounds above any requirements for trader status and do not plan to use mark-to-market election.

@fanfare, if I traded the last day of the year and sold the shares and did not buy those shares for 30 days then I would NOT have a loss from wash sale rule. All those losses would have been realized in the year they happened. But in my case, I continued trading the same stock into January and so my losses rolled forward into the January trades. So I will have a massive capital gain loss on the January trades that will carry forward indefinitely until i use up all those losses as deductions.

Quick soapbox- I could theoretically go lobby Washington to change the wash-sale rules as they apply to day traders, or I guess I’ll just have a trade a different stock one month of the year… or I’ll just take a vacation in December!  If all I have to do to work around it is take a vacation in December then it doesn’t really seem like the wash sale rule was implemented to address day trading… as I can still day trade with ease for 11 months of the year…