My company performed a sale-to-cover when some RSUs vested. It took a few days to settle, and there was a ST loss of $1000 on the sale. Seven days later, an ISO same-day sale of the same stock was made (reports as compensation since it's disqualified), with a STG = 0. Did the ISO same-day sale make the RSU sale-to-cover a wash sale? If so, can the loss be recovered by the ISO same-day sale, or is the RSU loss unrecoverable? (Pub 550, Wash Sales example 2 on p 56 confuses me because it doesn't describe carrying forward the loss; it simply says "you cannot deduct your loss".) If it can be recovered, how does that work since the ISO basis is included in compensation on the W2?
In another case, an ESPP sale couldn't be sold for several months after an IPO. It was eventually sold at a ST loss of $3000, and there was an ISO same-day sale on the same calendar date. Is the ESPP loss a wash sale? If so, can the loss be recovered by the ISO same-day sale that happened to occur on the same calendar date, or is the loss unrecoverable?
For the RSU X shares were sold at a loss. You "purchased" Y shares on the ISO within the wash sale period. The loss is disallowed to the extent the number of Y shares purchased equaled or exceeded the number of X shares. Example 1 - number of X shares sold 70. number of Y shares purchased 100. entire loss is a wash sale but the loss only is added to the tax basis of 70 of those Y shares. Example 2 - same number of X shares sold.
number of Y shares purchased 50. there is a wash sale only on 50 of the X shares sold (50/70*1000) so that loss gets added to the 50 Y shares. when the Y shares are sold you may need to adjust the basis . when reporting on 8949 you'll need to use code B to report incorrect basis an column G for the correction.
as to the ESPP sold at a loss (you use the sales date), if identical securities were purchased within 31 days before or after the sale you have a wash sale to the extent the same number of shares were purchased.
this can get complicated if some of the purchases were already adjusted for losses on other wash sales.
