If I buy a stock three times and sell it three times all within a one month window at a loss on each sale should not the gain loss be zero?

[johntheretiree]

On Aug 29 of 2024 I placed three purchases for an ETF I will call XYZ and sold all of the shares at a loss on Sept 9.  So I have three wash sales.  I am now filing taxes with an extension filed on the 2024 tax year.  I now find that my broker has created a very complicated 1099 that I am still trying to comprehend.  I am intending to ignore the way they present the data because I think they have made an error that would be called "in my favor" (and it would be called an ERROR by the IRS).  When I work through the problem as I will describe below, I believe that they are inappropriately allowing me to declare a loss for some of the shares.  Since I do not intend to use their numbers - the amount of money I will report to the IRS will be more than the broker 1099 reported (covered short term sale).

So to my question.  On August 29 I placed three purchases for ETF XYZ.  On Sept 9, I made three sales for all of the shares, each sale being at a loss.  It seems like the math is simple here.  I expect to declare no gain or loss for the sales.  Now the devil will be working through the Turbotax Screens but I have been using TT for 20 years and that is not my question here.  My question is basically do I understand the wash sale rules for this very simple case.

My confusion is caused by almost all the examples of people using wash sale rules at some point include them rebuying the shares and getting an adjusted cost basis.

So to rephrase my question as simply as possible: If I were to buy 100$ of an ETF and sell it 10 days later for $95.  Is not the correct amount of loss/gain that needs to be reported ZERO?  

I am using Turbotax 2024 Premier Desktop Windows 11 Pro.  I will file a paper return and will do nothing electronically

[rjs · Accepted solution]

If the three purchases and three sales that you described were your only transactions involving the "XYZ" ETF, then you do not have a wash sale. You report the three sales on your tax return, and claim all of the losses.

You didn't say what is complicated about the 1099-B from the broker. It should just show the three sales, with a loss on each one. But you said that the 1099-B shows a loss for "some" of the shares. The way you described the purchases and sales you have a loss on all of the shares. So there might be something you have not told us.

As for your rephrased example, if you buy an ETF for $100 and sell it 10 days later for $95, and you have no other purchases or sales of the same ETF, then you have a loss of $5, which you report on your tax return.

[johntheretiree]

I may be missing something here, but this seems to be a wash sale situation.  I placed three buys of ETF XYZ august 28, 2024 for (example here not the real numbers) let us say 100$.  In much less than 30 days I placed three sales on Sept 6, 2024 which resulted in Proceeds of 95$ (again an example here, not the real numbers).  It is my understanding from multiple sources that a wash sale results when a stock is purchased either less than 30 days before or less than 30 days after the sale of a stock at a loss.  In my example, I purchased the ETF approximately 9 days before I sold it.  Thus, I think it is a wash sale.  In the above example, it is simple a 5$ real loss.  So my question of the community is: is there a complicated formula here - or is it just plain simple - I cannot count the 5$ loss because of wash sales.

As to the broker statement, I am almost certain it is full of errors.  I intend to enter the data as I understand it in Turbotax premier - and then probably deciding it is not worth making the broker file and amended 1099 with the IRS.  My interaction with my broker and my correction of their data is not an issue I want to address on this message board.  I am simply in this post trying to make sure that I am not missing something in wash sale rules.  As I said in my original post, the examples I can find for wash sales at the IRS and many websites all talk about redistributing adjusted cost basis for purchases of the same stock AFTER the sale.  My case seems to be very simple.  I did not wait 31 days after my initial purchase and am therefore subject to wash sale rules.  What am I missing?

Thanks in advance.  I am trying to learn from this experience and never intend to do a wash sale again (:

Johnny the retiree (and trying to stay that way).

[rjs]

What you're missing is that the shares you sold were not "replacement stock" under the wash sale rule. You sold the same shares that you bought. There are no other shares. There is no replacement stock. The wash sale rule does not apply.

Here's a link to an explanation of Wash Sales and Replacement Stock. In the explanation, note particularly item 1, "Selling All."

That explanation is part of a larger detailed discussion of the intricacies of The Wash Sale Rule, with many examples. You might find it helpful to read some of the additional pages that are linked to.

[johntheretiree]

Thank you rjs- I think that is the answer.  I am however looking for a second opinion since the answer is critical to my taxes.  To start this process I have just ordered the book referenced in your answer "Capital Gains, Minimal Taxes:"

The reason I am being so intense here (I prefer the term "nerd-like") is that my broker (who I will not name here in order not to post a complaint for a major business entity) - my broker has clearly reported some of the sales of ETF "XYZ" to the IRS as "wash sales" and then they made several other mistakes including misreporting the actual proceeds of the sale - all of which can be determined from my downloaded monthly statements.

Yesterday before the holiday, I made a formal request that the broker review their 1099 and revise it and report the revision to the IRS.  As a single individual I have no expectation that they will comply- because it is highly likely that I am not an isolated case and few fortune 500 companies want to admit that there fancy software just messed up and perhaps no human had the opportunity to review.

So could someone else please weigh in perhaps with another reference?  It is unfortunate that the IRS does not appear to have a sense of humor (:  Thanks again rjs!

[Mike9241]

possibly the broker deems the sale of the 1st two lots as wash sales with all the loss being reflected on the 3rd lot sold. just guessing 

[Hal_Al]

@Mike9241  said "the broker deems the sale of the 1st two lots as wash sales with all the loss being reflected on the 3rd lot sold"

Yes, that's how it usually works. But, what may have happened is that what the broker reported on the third sale did not include the adjusted basis for the  previous wash sales. You may have to make an adjustment when you enter the 1099-B in TT.  

[johntheretiree]

At this point roughly 24 hours after my initial post, I want to thank everyone who has contributed here and especially rjs for providing me with one or more excellent references.

After my interaction with my broker this coming Weds., I will attempt to summarize and 'close'

 the case after trying to determine what the 'best' answer is.  For the moment I would like to leave this posting open (perhaps until late July) and encourage anyone with opinions, experience, etc. to comment.

It is becoming apparent to me that the case is a bit complex (three buys over two days in august and 3 sales over two days in September in the course of 10 days).  To add further complication the brokerage changed the sale information on the 1099.  There are indeed 3 buys (two days in August) and 3 sales (two days in September) as reflected in the end of month statements.  The broker failed to provide cost basis in the September statement or in the trade confirmations for the sales but the cost basis was reported for the buys in August, a situation which quite frankly I have never seen before.  To compound the problem, on the 1099, the broker split one of the three sales into two different sales (100 shares in a single reported trade statement which were sold as a single lot but somehow got split in the 1099).  So the 1099 reports 4 sales but the trading statements clearly show only 3 sales and no lot splitting.

At this point: 1) I am glad I simplified the problem to 'pretend' that I purchased a single lot of 100 shr of XYZ ETF in August and 9 days later I sold the same shares in September; and 2) Based on the excellent comments I have received in this post - I now have at least two ways to 'solve' this problem a) simply put it in as trades and sales in my return using the actual cost basis and actual lots while ignoring the 1099 entries for ETF XYZ - my concern will be that the IRS will detect the discrepancy or b) (most likely scenario) just suck it in and make roughly 9 entries with cost basis and lot splitting that has been adjusted without clarity by an unknown formula.  Not entirely surprisingly, if I eyeball the very confusing data from the broker, I believe that the errors will cancel out (some shares subject to wash sale rules while other shares not subject to that rule and declaring real short term loses).

So with thanks to the entire Turbotax community (and me with 8 hours with excel spreadsheets reviewing all the possible ways to treat the data) - I now have two ways to address the problem.  Most importantly, I now have been educated enough to have an intelligent conversation with the broker and ask them what the hell they were doing.. (:

Further comments are solicited - (especially if flawed logic is detected), however I am handicapped by intentionally not using real numbers, tax rates, etc. as is Turbotax communities policy and my paranoid privacy policy because of our current 'world'

Happy trails,  John the retiree (aka Johnny).

[rjs]

"three buys over two days in august and 3 sales over two days in September"

This is the first time you have mentioned that the purchases were not all on the same day and the sales were not all on the same day. In your first two posts you said that you made three purchases on one day and three sales on one day. It makes a difference. The purchases and sales each being spread over two days probably explains the broker's treatment of them on the 1099-B. (We haven't discussed the identification of which shares were sold when, but that also comes into play.)

"I am glad I simplified the problem"

By oversimplifying you masked the true nature of the situation and got answers that do not apply to what you actually did.

"I am handicapped by intentionally not using real numbers, tax rates, etc. as is TurboTax communities policy"

I don't know where you got the idea that this TurboTax community does not want you to post accurate numbers. You should not post personally identifiable information such as your full name, address, phone number, email address, Social Security number, account numbers, and so on, because this is a public web site that anyone can view. But you should always post exact accurate amounts and rates from your tax return and forms such as W-2 and 1099 to be sure that you get correct answers. There are cases where a difference of $1 can change the whole picture.

[johntheretiree]

Thank you again rjs.  My earlier simplification is my style.  Start with a simpler problem (not lying or misrepresenting) when the problem makes no sense.  When I had understood the simpler problem go to the more complicated problem.  The note you just replied to was the more complicated version.  Your answer is greatly appreciated (buying over two days and selling over 2 days changes the problem).  For the record, I never intended to buy over two days and sell over two days - my expertise is not taxes and trading but making trading mistakes is always worse than making more time..

I think the good news is when I posted my questions and replies, I spent 8 hrs with excel spreadsheets (one of my skills) and it looks like using the broker's numbers may cause no harm (assuming there was no wash sale will lead to the same result as typing in the data as exactly reported in at least 4 entries using the broker data with both wash sales and allowed losses).  It will likely be Tuesday before I with all deliberation and reflection, enter the information in Turbotax, every way I can think of -this is my style - slow but sure and matching all competitors with 18 hrs as a day (when younger and really employed).  Wednesday the broker phones me and I will be able to more capably be able to ask them about the changes they made to the cost basis.

As to which shares were sold when, FIFO was used but I do not know how FIFO applies to different lots which were purchased at different times on the same day.  Indeed the timing reported on the trades in the monthly statement and the trading confirmations has been apparently altered (reported differently) on the 1099.  i.e shares which were bought at 3pm in august as a second purchase that day seem to have been sold first in Sept (I think this is two much detail here that I will address with the broker)

Your thoughts are always welcome, but I seem to have a plan.

Thanks: John the retiree (and trying to stay that way)

[johntheretiree]

I am going to attempt a 'brief' reply here and then acknowledge rjs as providing the deepest and best reply EVEN THOUGH I did not properly phrase my initial question.  My goal in this reply is largely to make sure a future reader who pulls up this (then closed) note thread receives relatively good advice.

I first phrased my question when I was reviewing a 1099 form from my broker for sales of ETF XYZ.  My question was "If I buy a stock three times and sell it three times all within a one month window at a loss on each sale should not the gain be zero"

I then at the end of that first posting said "So to rephrase my question as simply as possible:  If I were to buy 100$ of an ETF and sell it later (in less than 30 days), is not the correct amount of loss/gain that needs to be reported ZERO.  rjs quickly (and in my opinion after much reading) replied that in this simple case of one purchase and one sale - THERE IS NO WASH SALE.

As to the first phrased question - there were indeed three trades and three sales in less than a month of the same ETF and the sales did close out all positions.  This is where it gets a little complicated.  AND it is further complicated that the 3 trades took place over 2 days and the 3 sales took place over 2 days (which at the point I posted the question, I was so uneducated that I did not know the multiple days were significant....).  I will let rjs speak for himself because he is clearly more qualified BUT he seemed to say or imply that if three trades were made on the same day and all shares were sold on the same day that there was no wash sale.

It was my unforced error - but only at the end of the note thread did I add the complexity of the 3 buys occurred over 2 days and the 3 sales occurred over 2 days with the buys and sells being 9-10 days apart.

I do not really know what the correct answer would be in the complex case - but the broker confused it even further.  My three sales were reported as 5, lots were seemingly unnecessarily divided and extra cost basis was added.  To add insult to injury last in first out (LIFO) was used for the sales.  The broker just told me over the phone, that LIFO does not always apply for shares sold on the same day.  In other words cost basis from lots purchased later on the purchase day were applied to lots sold earlier on the sale day (I only know this from 8 excel spreadsheets where I guessed at cost basis.  This change of ordering for cost basis within the day for sales occurred on the 1099 but apparently not on the monthly statements.  In the end the broker 1099 has 5 sales for the actual 3 sales but the total number of shares matches.  Interestingly, 3 of the reported 5 sales are wash sales.  The amount that could not be claimed from the wash sales matches exactly the added capital gain to the sold shares (across all five sales positions).  2 of the 5 sales actually have a declared loss AND the losses declared match exactly the real loss and are the number that would be reported if I had ignored the wash sales.  So does the wash sale rule apply to my complex case?  The math is identical either way!

So my problem is solved and I hope my lack of education (until I studied) helps a future person.

rjs also recommended in his post a very excellent book from a company called Fairmark entitled "Capital Gains..." by Kay A. Thomas.  The chapter on wash sales was very revealing and I highly recommend that chapter.  While my exact case was not covered, he came so close that I can call it a 'gray area'.  

So thanks rjs -you helped me educate myself and also personally educated me.  From a retiree, that is the highest compliment that I can give.

I will now attempt to mark rjs first post as the best answer.  After that the questions just got too complex as Kay A. Thomas so comments.

John the retiree

[Mike9241]

purchasing and selling on different days would be treated as separate purchases and sales of the lots. to further complicate things buying at multiple times during the same day would likely be at different prices. thus with the sale of those shares there could be a gain on one of the purchases and a loss on the other. it can get very complicated. the loss would trigger the wash sale rules when replacement shares were purchased with 30 days of the sale at a loss. with wash sales the loss is added to the cost of the replacement shares. in the end since all the shares were disposed of the total loss should be the difference between the actual costs and sales prices.   the fact that there were no additional purchases within 30 days of the last sale at a loss would result in recognition of all the losses