Wash sale or not? How to report

[someone]

I'm not sure if the wash sale rule applies. Here's my situation:

• 5/23/2019 and earlier - "bought" (RSU vest) many shares and did not sell most of them; no activity until next item
• 8/21/2019 "bought" 675 shares (RSU vest), automatically selling 187 shares to cover taxes (the shares to cover were "bought" and sold at same price, so no gain or loss there)
• 8/29/2019 sold the remaining 488 shares that were granted on 8/21 at a loss (say $1500, yeah rough week); no activity until next item
• 11/20/2019 "bought" 675 shares (RSU vest)

Since the 8/21 "purchase" was within 30 days of the 8/29 sale, I guess the 8/29 loss is a wash sale. But reading  "When the Rule Does Not Apply" in wash rule article at Zacks, it might not be one after all. So is the 8/29 sale a wash sale?

If the 8/29 sale is a wash sale, I'd think the disallowed basis would get added to the basis for the purchase that made it a wash sale -- the 8/21 purchase. But if I add the basis there, I get credit for the loss on 8/29 after all, because the 8/29 sale is made up entirely of shares "bought" on 8/21. That seems like exactly what the wash sale rule is supposed to disallow. So, to which transaction's basis should I add the loss?

[fanfare]

"I get credit for the loss on 8/29 after all"

When you finally sell the identical shares with adjusted basis this is exactly what happens.  No problem there.

[fanfare]

correction it is the earliest shares.

That would be 5/23

when you sold 488 shares, those were 5/23 shares.

when you sell you sell FIFO, 

if there's any 5/23 shares left you adjust their basis to the extent possible.

if there's any loss unallocated then you adjust the 8/21 shares

until the loss is entirely allocated.

if you had a profit on the 5/23 shares then none of this matters.

[someone]

Thanks for the replies!

Still unsure because I didn't sell FIFO, I chose the lot "bought" on 8/21 to sell on 8/29. The shares sold on 8/29 are recorded as the ones purchased on 8/21 in brokerage website / documents.

[fanfare · Accepted solution]

You're saying you bought shares on 8/21 and sold them on 8/29 (designated lot).

There's no wash sale there since there was no purchase of identical shares (besides the ones you are selling) within the period of thirty days around 8/29.

Separately,

you do have a small loss on the 187 shares to cover, namely a commission, and your form 8949 should reflect that.