Wash sale loss disallowed Robinhood

[DianeW777]

Beginning of your questions the following statement is correct about your wash sale in 2020.

• So, when I eventually sell them, let's say this year in 2022, their cost basis should be incremented from $20K to $27K, as the loss which was $7K. This is how I understand the wash sale loss works.

Adjust your 1099-B numbers on your manual record to the ones you believe to be correct and in TurboTax. (Sales price and cost basis should equal.)

.We will not be able to explain the difference in the numbers on your statement.  If you have all of your documentation for the shares purchased, sold and the the repurchase of the same stock then you know what your wash sale loss is.  For 2021, you will have no gain or loss that should show up for these shares so actually you need to equal the selling price and cost basis (both should be the same figure) while tracking your transactions manually outside of the tax return. Then when you sell you will use the basis you have now ($27,000 per your example).

When you finally dispose of the wash sale stock you will use the actual basis increased for these losses which your financial agent will not know. The broker will always know when a wash sale occurs but they will not know when it ends and they will not know the cost basis when it is sold.

Please update here if you need further assistance.

@ira2021  See the clarification above.

[Edited: 03/01/2022 | 5:24a PST]

[fanfare]

Generally, the rule is,

you have to report what's on your 1099-B, unless you have supporting documents for a different report.

[fanfare]

"the rest is being flagged as washed sales when I don't have any of those stocks since July. "

That's a completely different issue.

Nothing you do or stop doing can expunge the wash sale loss disallowed information from your consolidated1099-B.

And, IRS reporting instructions require you to provide  those details on Form 8949.

[a15973]

And they are right, the washed sales calculations are not incorrect, the issue is that once stocks were sold months ago before the end of the year, those amounts should not be flagged as washed sales anymore. They also told me to work with a tax advisor. Runaway from HR block, useless, worked with them in the past, but if you can find someone that is reliable online and wouldn't mind sharing, that would be great. I would do the same. 

[ira2021]

@DianeW777 

Can you please explain this a bit?

" For 2021, you will no gain or loss that should show up for these shares so actually you need to equal the selling price and cost basis while tracking your transactions manually outside of the tax return."

My cost was $20k and sale was $13k. This is from my transactions in 2021. So what should I equate them to, for my 2021 tax returns?

Here is the permalink to my original post:

https://ttlc.intuit.com/community/investments-and-rental-properties/discussion/re-wash-sale-loss-dis...

[a15973]

That is good to know, because I understood that they would have to unflag it if the stocks were sold. So if lets say, the 1099 can't be corrected, what do I do if from all purchases and sales of the stocks I have a cost of $700k to purchase, proceeds of $625K... washed sales for $70k and only a recognized loss of $5k? Would the $70k in washed sales disallowed be used to lower other income I had from trading (I have other accounts that are in considerable profit)?

[fanfare]

@a15973 

it's called a disallowed loss because you can't deduct it as a loss on your tax return.

Your losses don't disappear, they move elsewhere. 

Hint: see the basis of the triggering BUY order that resulted in a wash sale.

Note: those BUY orders also can turn into wash sales if you are very active in that security.

[a15973]

First of all I really appreciate the time that some of the experts that are in these forums spend responding to ignorant people in taxes, like myself.

I do understand the concept of wash sales disallowed, and I get that when you have been flagged for a specific transaction, you can't use that loss, but I also understand that loss then transitions somewhere else, and that somewhere else, in case you do hundreds of transactions of the same stock, should be the cost of the purchase of that stock. 

There is a specific stock that I traded several times, more than what I can manually calculate, but at the end you see the following:

Proceeds reported - $12,366.81

Cost reported - $13,737.79

Washed sales disallowed - $1,039.17

Gain or loss - (331.81)

When you see this in a 1099... Am I supposed to accept that even if I ended up with less than $1000 of what I had initially, that I can only report a loss of $331.81? How and when can I recognize the other loss I had off more than $1000? 

[RobertB4444]

@a15973  The IRS considers wash sales to be imaginary losses.  Before they disallowed them people used them to generate losses for their taxes a lot - so the rules don't allow them.  The way the IRS views the trade you have listed is that there was a loss of $1370.98 on the trade but $1,039.17 was imaginary losses so you only get to deduct $331.81.  You will never deduct wash sale losses.

[fanfare]

Expert  @RobertB4444 

"The IRS considers wash sales to be imaginary losses."

you have an active imagination. wash sale losses are called disallowed, not imaginary.

"You will never deduct wash sale losses."

When the triggering BUY is sold, your wash sale loss will be realized for tax purposes.

[a15973]

"When the triggering BUY is sold, your wash sale loss will be realized for tax purposes." - For the example I shared, I did sell those stocks months ago and way before year end. Am I allowed to realize the $1,039.17 as a loss when Robinhood clearly didn't? or not?

[fanfare]

as I said before, a triggering buy can turn into another wash sale.

you have to follow the trail of buys and sells.

eventually, if you stop trading that stock, all the losses are recorded.

[a15973]

My issue is that I am trying to understand the "eventually".

I stopped trading any traditional stocks in July/Aug 2021... and since then I have not held any. That's why I was trying to understand how can I recognized those $1,039.17 as a loss in 2021. Because if this is not something I can do right now, then when?

[fanfare]

If your 1099-B from Robinhood is wrong, you can file with the correct numbers.

Be prepared to explain any discrepancies to IRS if they come asking. This is probably unlikely.

We're all on the honor system here.

[a15973]

Appreciate your response. 

I want to do the right thing and that's why I insist so much in understanding the issue and also understand what I can do.

Thanks!