Wash Sale Chain

[dillon_smith92]

@AmyC,

Could you please provide a little more explanation/clarity on your answer; I still do not fully understand the answer?

1 XYZ Option

8/19/22 - 12/16/22

1 XYZ Option

11/16/22 - 12/16/22

*** above two were sold at the same time

1 XYZ Option

12/15/22 - 12/23/22

1 XYZ Option

11/16/22 - 1/30/23

If all substantially similar, what are the wash sales? Thank you.

Add on question - are call options with different strike prices and expiration dates considered "substantially similar" to the IRS?

Your response is greatly appreciated!

God Bless,

M. Dillon Smith

[AmyC]

Let me explain more. Let's do an example.

Buy ABC 100 shares for $4,000 - date irrelevant

Sell ABC  100 shares April 1 for $2,000, this could be a $2k loss except

Buy ABC 50 shares  April 28 for $1,200

A purchase that is 30 days either side of the sale, you have a wash sale. So the wash is added to the basis and the most recent purchase is your purchase date.

However, only half the shares were purchased. So half is a loss and half is a wash.

Now we have a wash sale of 50 shares with the most recent purchase date, April 28.

Now, basis is $2,200, purchase date is April 28.

Half the shares reported as sold for $1k loss.

Yes call options with different strike prices are substantially similar. Corn is corn is corn. ABC stock is ABC stock. XYZ is XYZ, price is not a factor.

[dillon_smith92]

@AmyC ,

Yes, I totally understand that example and how the wash sale works; I am having trouble applying it to my specific situation due to the complication on multiple trades. So, if you can help my apply the example to my exact situation, that would help tremendously - thank you for your patient! 😊

This is the info for my situation, if you could run the process with these details, it would rid of any confusion:

Sold 2 XYZ on 12/16/22 (however, different loss amounts, different lots 8/19/22 & 11/16/22)

*** I know buy date is irrelevant for determining IF its a wash, but it has to be considered since they were different lots with different loss amounts, correct?

Bought 1 XYZ on 11/16/22 - sold it on 1/30/23 (at loss)

Bought 1 XYZ on 12/5/22 - sold it on 12/23/22 (at loss)

Anyway, if you could just stop through my situation, the above one, that would be helpful - seems more complicated then the example.

Regardless, this is the last I will bother you with it - thanks again!

M. Dillon Smith

[AmyC]

I believe your issue is lots. Lot sizes can vary, usually 100 shares for an option. You will need to match up your shares, like my example.

You asked about similarity earlier. The tax regulations say that if two different stocks are linked together in such a way that any change in the price of one will be reflected in the price of another, they're likely to be treated as substantially identical securities for purposes of the wash sale rule. Which is why I said corn is corn. The price affects all of your investment.

I can pretend each lot is typical 100 shares but I don't believe so based on your comments.

So, 2 lots sold 12/16.  For clarity: 

• 8/19 purchase becomes a wash since you bought more of the stock on 11/16, within 30 days of selling. Add this sale to that one.
• The 11/16 becomes a wash since you bought more 12/5, within 30 days of selling. Add this to the 12/5 purchase.

Sold 1/30/23 - more than 30 days after last purchase or sale, if another purchase does not occur during 30 days either side, you will have a gain or loss on your return

Sold 12/23 - wash sale since not more than 30 days from last purchase, 12/5

No bother, just trying to get on the same page! I hope this has helped.

Maybe directions and information straight from the IRS, please go to Pub 550 and read through the wash sales. You can do control F and search for wash. In addition, you have crossed years within the 30 day rule.

[dillon_smith92]

@AmyC ,

Okay, now I think we are getting somewhere!

Yes, when I say lot, I am simply meaning the contracts were not purchased at the same time (aka different basis, different loss amounts). However, each contact is just like an standard option, represents 100 shares of underlying stock.

Your explanation makes more sense now - thanks again for you time!

M. Dillon Smith

[dillon_smith92]

@AmyC ,

Okay, I have done a lot of further research and looking into this situation and I believe I have finally figured it out, and also understand the process in which you were explaining to me. I spent some time on the IRS website publication that you referenced - thank you very much for sharing that info.

Here is what I came up with & would love if you would take a peak and let me know if I am on the right track now, and if the connecting/matching of shares is done properly (all contacts are standard options that represent 100 shares):

Essentially, since sold on same day, we start with 8/19, it is a wash sale to 3 different buys (two 11/16s and 12/5), but according to chronological rules, we go with which tool place first, correct? That is the 11/16 that was sold on 1/30, it was bought before the other 11/16, so basis and date of 8/19 is added to that.

Then, we look at the other 11/16 that was sold on 12/16, it is also a wash sale to the 12/5 trade (only one left to match too). We add the date and basis to that. Then we look at updated ones. The one sold on 12/23 is ended because no buys 30 days before or after 12/23; it can be recognized on 2022 taxes. However, the one sold on 1/30/23 will obviously have to be recognized on 2023 taxes, and will end the wash sale AS LONG as NO BUYS by 2/30/23.

I know that I have gotten extremely detailed here, but hard not too to be sure we are on the same page. If you could quickly review, I know your time is valuable and answer the question - do you think I have done this properly, I would again, be so grateful!

Trade	Acquired	Sold	Basis	Proceeds	Gain/Loss	Wash?
2 XYZ Contracts	8/19/22	12/16/22	1,177.68	0	-1,177.68	Yes
	11/16/22	12/16/22	159.67	0	-159.67	Yes
1 XYZ Contract	11/16/22	1/30/23	523.67	355.32	-168.35	No (if no buys before 2/30/23)
1 XYZ Contract	12/5/22	12/23/22	70.67	0	-70.67	No

Trade	Updated Acquired	Sold	Updated Basis	Proceeds	Updated Gain/Loss	Wash?
1 XYZ Contract	*8/19/22	1/30/23	*1,701.35	355.32	*-1,346.03	Ended (as long as no buys before 2/30)
1 XYZ Contract	*11/16/22	12/23/23	*230.34	0	*-230.34	Ended (no buys 30 days before or after 12/23)

M. Dillon Smith

[dillon_smith92]

@AmyC ,

Okay, I have done a lot of further research and looking into this situation and I believe I have finally figured it out, and also understand the process in which you were explaining to me. I spent some time on the IRS website publication that you referenced - thank you very much for sharing that info.

Here is what I came up with & would love if you would take a peak and let me know if I am on the right track now, and if the connecting/matching of shares is done properly (all contacts are standard options that represent 100 shares):

Essentially, since sold on same day, we start with 8/19, it is a wash sale to 3 different buys (two 11/16s and 12/5), but according to chronological rules, we go with which tool place first, correct? That is the 11/16 that was sold on 1/30, it was bought before the other 11/16, so basis and date of 8/19 is added to that.

Then, we look at the other 11/16 that was sold on 12/16, it is also a wash sale to the 12/5 trade (only one left to match too). We add the date and basis to that. Then we look at updated ones. The one sold on 12/23 is ended because no buys 30 days before or after 12/23; it can be recognized on 2022 taxes. However, the one sold on 1/30/23 will obviously have to be recognized on 2023 taxes, and will end the wash sale AS LONG as NO BUYS by 2/30/23.

I know that I have gotten extremely detailed here, but hard not too to be sure we are on the same page. If you could quickly review, I know your time is valuable and answer the question - do you think I have done this properly, I would again, be so grateful!

Trade	Acquired	Sold	Basis	Proceeds	Gain/Loss	Wash?
2 XYZ Contracts	8/19/22	12/16/22	1,177.68	0	-1,177.68	Yes
	11/16/22	12/16/22	159.67	0	-159.67	Yes
1 XYZ Contract	11/16/22	1/30/23	523.67	355.32	-168.35	No (if no buys before 2/30/23
1 XYZ Contract	12/5/22	12/23/22	70.67	0	-70.67	No

Trade	Updated Acquired	Sold	Updated Basis	Proceeds	Updated Gain/Loss	Wash?
1 XYZ Contract	*8/19/22	1/30/23	*1,701.35	355.32	*-1,346.03	Ended (as long as no buys before 2/30)
1 XYZ Contract	*11/16/22	12/23/23	*230.34	0	*-230.34	Ended (no buys 30 days before or after 12/23)

Again, thank you!

M. Dillon Smith

[dillon_smith92]

@AmyC ,

I have tried replying to this post with one more questions about 15 times, but it keeps deleting my reply to you; do you know why?

I spent a lot of time researching and came up with my final thoughts on this and wanted to be sure I was on the right page with my line of thinking.

Do you know why it won't let me post??

M. Dillon Smith

[dillon_smith92]

@AmyC ,

Okay, I have done a lot of further research and looking into this situation and I believe I have finally figured it out, and also understand the process in which you were explaining to me. I spent some time on the IRS website publication that you referenced - thank you very much for sharing that info.

Here is what I came up with & would love if you would take a peak and let me know if I am on the right track now, and if the connecting/matching of shares is done properly (all contacts are standard options that represent 100 shares):

Essentially, since sold on same day, we start with 8/19, it is a wash sale to 3 different buys (two 11/16s and 12/5), but according to chronological rules, we go with which tool place first, correct? That is the 11/16 that was sold on 1/30, it was bought before the other 11/16, so basis and date of 8/19 is added to that.

Then, we look at the other 11/16 that was sold on 12/16, it is also a wash sale to the 12/5 trade (only one left to match too). We add the date and basis to that. Then we look at updated ones. The one sold on 12/23 is ended because no buys 30 days before or after 12/23; it can be recognized on 2022 taxes. However, the one sold on 1/30/23 will obviously have to be recognized on 2023 taxes, and will end the wash sale AS LONG as NO BUYS by 2/30/23.

I know that I have gotten extremely detailed here, but hard not too to be sure we are on the same page. If you could quickly review, I know your time is valuable and answer the question - do you think I have done this properly, I would again, be so grateful!

Trade	Acquired	Sold	Basis	Proceeds	Gain/Loss	Wash?
2 XYZ Contracts	8/19/22	12/16/22	1,177.68	0	-1,177.68	Yes
	11/16/22	12/16/22	159.67	0	-159.67	Yes
1 XYZ Contract	11/16/22	1/30/23	523.67	355.32	-168.35	No (if no buys before 2/30/23
1 XYZ Contract	12/5/22	12/23/22	70.67	0	-70.67	No

Trade	Updated Acquired	Sold	Updated Basis	Proceeds	Updated Gain/Loss	Wash?
1 XYZ Contract	*8/19/22	1/30/23	*1,701.35	355.32	*-1,346.03	Ended (as long as no buys before 2/30)
1 XYZ Contract	*11/16/22	12/23/23	*230.34	0	*-230.34	Ended (no buys 30 days before or after 12/23)

M. Dillon Smith

[dillon_smith92]

@AmyC ,

Okay, I have done a lot of further research and looking into this situation and I believe I have finally figured it out, and also understand the process in which you were explaining to me. I spent some time on the IRS website publication that you referenced - thank you very much for sharing that info.

Here is what I came up with & would love if you would take a peak and let me know if I am on the right track now, and if the connecting/matching of shares is done properly (all contacts are standard options that represent 100 shares):

Essentially, since sold on same day, we start with 8/19, it is a wash sale to 3 different buys (two 11/16s and 12/5), but according to chronological rules, we go with which tool place first, correct? That is the 11/16 that was sold on 1/30, it was bought before the other 11/16, so basis and date of 8/19 is added to that.

Then, we look at the other 11/16 that was sold on 12/16, it is also a wash sale to the 12/5 trade (only one left to match too). We add the date and basis to that. Then we look at updated ones. The one sold on 12/23 is ended because no buys 30 days before or after 12/23; it can be recognized on 2022 taxes. However, the one sold on 1/30/23 will obviously have to be recognized on 2023 taxes, and will end the wash sale AS LONG as NO BUYS by 2/30/23.

-8/19 is a wash to 11/16 (bought first, sold 1/30/23)

-11/16 is a wash to 12/5 (this 11/16 was bought after, even though same day)

-8/19 carries to 2023, and will end if i don't buy more 30 days before or after

-11/16 that carries to the 12/5, well it was sold 12/23, and it can be recognized in 2022 because I have no other buys from 11/23-1/23 (other then itself) - its done (aka no other shares to match to because the othe was already matched)

I know that I have gotten extremely detailed here, but hard not too to be sure we are on the same page. If you could quickly review, I know your time is valuable and answer the question - do you think I have done this properly, I would again, be so grateful!

M. Dillon Smith

[AmyC]

I see your new thought process, you have worked hard on this! I agree with the logic here. Dec 5 was a sale, not a buy. I am impressed! We are on the same page!

[dillon_smith92]

@AmyC ,

Dec. 5th was a buy, it was sold on Dec. 23rd.

I think the matching makes sense now, and as best I can tell, is done in order of guidance given directly by the IRS. Matching and equal number of shares/contracts bought with an equal number sold, in the same order your bought them.

By that logic, most all my loss will go into 2023, but at least a tiny bit will be left for 2022.

Again, my my concern was just that I was following guidance correctly, as I know that you cannot "choose" a more beneficial matching process when doing this!

So glad we are in agreement and on the same page now.

M. Dillon Smith

[AmyC]

A small loss for 2022 and I bet you don't buy anymore for another 3 weeks 🙂

Then you can claim the Jan sale for 2023. I am glad it all worked out!