Question to Wash Sale

[qwer1234]

I have held my corporate stock for a long time, which suffers a significant loss. I want to gradually exit the position to offset capital gains from other stocks.  But my corporate grant distribution may trigger the Wash Sale rule. For example, if one grant is expected to distribute on Jan 31st, 2021,  what are the transaction windows to avoid the Wash Sale? Also, does the Wash Sale refer to a transaction or settlement date? They are a few days apart. 

Thanks for your help. 

[NCperson]

if you sell a stock at a loss and then buy back that same stock within 30 days, it will trigger a 'wash sale'.  

if you are slowly exiting this stock, a simple solution would be to sell additional stock shortly after the grant is distributed.

1) I sold 1000 shares stock ABC at a significant loss on 1/25/21

2) I "purchase" 500 shares of  ABC stock on 1/31/21, which will create a wash sale on half of the transaction that occurred on 1/25/21.  This 'purchase' is an RSU where the restriction is now satisfied . The wash sale will remain in place until an additional 500 shares are sold. 

3) on 2/1/21 I sell 500 shares of ABC stock (doesn't matter which lot) which will reverse the wash sale from step 1. 

ps - when you state 'grant distributed', I take that to mean the restriction is removed from an RSU.  if you are simply granted more shares with restrictions, those don't count in any wash sale discussion because you don't really own those shares. 

[qwer1234]

"Grant distribution" means RSU is distributed to my personal account. In the transaction history, it shows I buy XXX stock @0.01 USD.  I assume IRS will consider it a BUY transaction.  Following your example, I can sell stock ABC at a significant loss on Dec 2020, which helps offset capital gain and won't trigger a 'wash sale'.

The second part of my question is about the date. I want to confirm that 30 calendar days refer to transaction dates, not settlement dates.  

[rjs]

It's based on the trade date or transaction date, not the settlement date.

The wash sale window is 30 days before the transaction date and 30 days after the transaction date, so it's a total of 61 days: the transaction date, the 30 days before that date, and the 30 days after that date.

[NCperson · Accepted solution]

yes, the conversion of the RSU to stock shares that you own is a 'buy'.  

https://www.irs.gov/instructions/i1040sd#idm140099366727232

this link is not specific to your question, but you are at risk based on transaction dates only.  The transaction date is the date you acquire property and sell property.  The settlement date is simply the date the cash moves to cover the trade. 

If I sell at a loss on 12/23/20 but it doesn't settle until 12/24/20, I am no longer at risk to the whims of the market once I sell on the 23rd.  If I buy back prior to January 22, 2021 (remember December has 31 days),  a wash sale has occurred, even if the settlement date is Jan 25; I am at risk based on the date I buy, not the date it settles. 

you may want to read the instructions for Form 8949 as it talks about acquisition dates and dispositions dates, which are transaction dates,