Do I have to track and report wash sales if I close my position prior to year end?

[mikeinpax]

I have multiple wash sales in a string of options that I bought and sold in early 2020.  I closed out of the position in July and have not traded in the company since then.  When I do my taxes, it will not make a difference whether I report the wash sales, but it will take more work.  Since it is not material to my total capital gains for the year, can I just skip the extra work and not report any washes?

[tagteam · Accepted solution]

If you are not holding any "substantially identical" replacement securities, then the wash sale rule does not apply (i.e., if you have closed out all of your positions and are flat).

[mikeinpax]

Thank you!  That's what I was hoping to hear.

[fanfare]

IRS requires covered transactions with adjustments to be detailed on Form 8949 (or equivalent, e.g. consolidated 1099-B report from your broker).

Your wash sales will show an adjustment.

That's what the IRS instructions state. It doesn't matter that you sold the stock that triggered the wash sale.

No subsequent actions will expunge the wash sales from your records.

[Critter-3]

Since your broker is required to report the basis and wash sales simply enter or import exactly what the broker has reported on the 1099-B to keep inline with what the IRS has been reported. Less chance of an audit this way.

[fanfare]

Often the transactions are so numerous that TurboTax won't handle that.

[Anonymous]

report the wash sale.  in the end it won't make a difference because you closed out that position by year-end. 

however, if you had a loss on sale in December 2019,  if you reestablish a position in that security in January 2020 within a 31 day period of the December loss, you'll have a wash sale for that December transaction. 

[tagteam]

The OP stated the positions were closed out in July.

[vincus007]

My 1099-B form broker has summary of "proceeds" and Cost basis". there is another column for Wash sale Loss Disallowed.  To make it simple, lets say my summary show:

proceeds is  10,000

cost basis is 7,000 

wash sale is 2,000.  
realized gain is  5,000

(In other words, i have to subtract the 2k from the 7k cost basis because its disallowed, therefore making my cost basis is only 5k and making my realized gain 5k.)

I have closed all positions prior to year end. So shouldn't my realized gain be 3k instead of 5k?  I should be able to use the entire 7k cost basis which already includes the wash sale cost basis because I closed all my positions and didn't purchase anymore, right? 

So how do i enter that in turbo tax? If I allow turbo tax to import it via online, it does, but it shows a realized gain of 5k.  I need it to show a realized gain of 3k because i am supposed to be able to use the entire cost basis since i closed out all my positions before year end last year. So how do I do this on turbo tax?

If i try to enter it via summary, It asks for the total proceeds and total cost basis. If i enter just those 2 information then I'm fine, it will show a gain of 3k. But my  1099B shows a gain of 5k  (due to the wash sale).

So how do i reconcile this? If i use the box "i need to adjust my total cost basis" and check box "W" (non deductible loss from a wash sale), then it will increase my gain back to 5k. 

Bottom line:  How do input the proceeds, cost basis and wash sale, but also indicate that all positions are closed therefore the gain should be 3k instead of 5k . 

[DianeW777]

Yes. When you have a wash sale that overlaps tax years then the wash sale loss is not allowed. In this case it is added to the cost basis to be utilized on the final sale/disposition (without repurchase within the 60 day window) to figure gain or loss.

If you closed all wash sale stock by end of year (and did not repurchase) you would take the entire cost basis against the selling price of all shares involved in the wash sale.

Adjust/change your cost basis for the transactions that involve wash sales.  Keep in mind that the broker knows when a wash sale occurs, and reports it.  They may not know when a wash sale ends and this is why you must track these sales yourself.

• Sign into your TurboTax account > Search for 1099b > click on the Jump to ... Link > find the sales that you need to adjust the basis and make the change.

@vincus007