Wash sale loss disallowed Robinhood

[stonker12]

Hello,

Were you able to figure it out?

I am going through a similar situation. Most stocks/options that triggered WSL either expired or closed before the end of the year 2021(by Oct 2021). 

As per RH, the cost basis is adjusted to reflect WSL. However, my net gain is still over 49k.  

Proceeds = 568k

Cost Basis = 583k ( As per RH, this includes adjusted WSL, I concur and verify since all my options/stocks                                             were  closed before the end of the year 2021)

WSL dissallowed = 64k

Net gains = 49k 

[GeorgeM777]

Closing your positions at year-end may not have resolved all losses disallowed by the wash sale rule.  The wash-sale rule prohibits selling an investment for a loss and replacing it with the same or a "substantially identical" investment 30 days before or after the sale.  Thus, there is that 61 day window where a sale and subsequent purchase could run afoul of the wash sale rule.  

Additionally, wash-sale rules apply across all of your accounts, including those outside RobinHood. In addition, wash-sale rules also apply to transactions in a spouse’s accounts. IRS regulations require only that RobinHood track and report wash sales on the same CUSIP number (a unique nine-character identifier for a security) within the same account. Ultimately, each individual is responsible for tracking sales in their accounts (and their spouse's accounts) to ensure they don’t have a wash sale.

@stonker12

[stonker12]

As you can see in the following screenshot for the AMC option, the cost basis is already adjusted. To verify, I have included all my AMC transactions for the year 2021. You can also see that I have included different positions at different strikes which qualifies for a substantially identical investment.  

I just do not know how to report this to IRS. How can I report that RH's 1099-B has a cost basis adjusted for WASH SALE LOSS?

@GeorgeM777

@JohnB5677

[GeorgeM777]

You should not have to separately report the transactions you included in your post because these were all covered transactions and basis was already reported to the IRS.  

If you have already uploaded your 1099-B into TurboTax, go back to the screen where you can review you RH sales. From the list on the screen, select a covered transaction which includes a wash sale and then click the edit tool.  On the Sales screen, scroll down the page and see if the wash sale amount is included in Box 1g.  Let us know if you the wash sale amount is in Box 1g.  

@stonker12

[stonker12]

Yes, it is included. But that's the problem though, isn't it?  Since RH's Cost basis already has WSL adjusted and all options had expired, why is it showing up WSL adjustment column. 

So basically what is happening is :

Net Gain/Loss = Proceeds - Adjusted Cost basis (cost Basis + WSL) +WSL 

What should have happened is 

Proceeds - Cost basis + WSL.

And in my case, it should be just 

Proceed - Cost basis (since RH already adjusts WSL)

If you go over the screenshot for AMC  that I have uploaded, you can clearly see that the Cost basis reflects WSL adjustments. 

[GeorgeM777]

Thank you for the additional information, but I don't see how the wash sale loss is being counted twice.  For example, if I look at what you posted above I see proceeds of $1,719.98 and a cost basis of $3,115 for a net loss of $1,395.02.  The wash sale of $1,395.02 disallows the loss, thus leaving a net gain/loss of 0.  The net gain/loss of 0 is what I see above for 2 AMC calls.  

@stonker12

[fanfare]

closing your trades and netting everything out does not expunge your wash sale records, nor relieve you of your reporting requirements.

IRS requires the details on all transactions with adjustment (e.g. wash sales).

[waisaacs]

Quick update - I am still going through my wash sales with Robinhood (I know... yes, filed extension) but so far, everything checks out.  Quite a few left to look at, so not closing the books here yet.  Couple of comments:

- my current main complaint is that they don't give any analysis of the wash determination; particularly bothersome to me is that I don't have reliable information on the current basis of stocks that were adjusted for (in my case options) wash sales.

- I asked explicitly about the wash rules for isolated option transactions and finally got a reply:

For Options, we follow the industry standard of processing wash sales by CUSIP. This means all aspects of the contract must be the same: underlying, direction, call or put, expiration, and strike.

Note that they do tie stock transactions to long option transactions, as I think even the IRS examples show.  I have washes from losses on, say, AAPL calls when I made AAPL stock purchases in the 61-day window.

My confidence in their accuracy has increased since I first posted, but as I said, still a chunk of cases to look at.

-William

[tvo1983]

I had 2 accounts one on Robinhood and one on Etrade. The Robinhood was with a loss of 20k with 15k wash sales disallowed proceed with 115k and Cost with 135k. The Etrade had a loss of 10k with 600 wash sales disallowed proceed with 250k and cost of 260k. It was kind of weird and I looked into Robinhood cross-checking the 1099B and transactions statement and found out Robinhood flagged the correct wash sales, but they messed up the deferred loss to the cost basis of the next batch. I surveyed through around 50 trades and they all had the same issues. I adjusted the wash sales to the correct amount for 2021 and reversed 2020 wash sales that I did not look into and Robinhood did not recognize 2020 wash sales disallowed to 2021 securities disposition. I hope this helps.

[SmartyJones]

@a15973 I know it’s a year later, but wanted to ask how things worked out, and if you have any learnings you can share?  I have the same issue this year that you had last year.  I sold off all of my positions in September, but Robinhood never cleared the wash sales, despite not repurchasing any positions.  

[DianeW777]

It's normal for the wash sale to be listed on your statement.  The brokerage knows when a wash sale occurs, they do not know when it ends.  You should report the wash sale (gain or loss) in the year you completely dispose/sell the stock that is part of the wash sale. It is up to you to keep the records for your wash sale transactions.

@SmartyJones 

[Critter-3]

A wash sale may have been reported on the 1099-B however it is usually captured by adjusting the basis of the replacement stock and needs to be reported on the return as indicated on the 1099-B.  Why do you think the wash sale was not already accounted for in the final sale ?   Did you do the math yourself and find the broker is incorrect ?   

[SmartyJones]

Thanks for the response.  I have all of the transaction records; however, is it normal for brokerages like Robinhood to disallowed Wash Sales when they have been cleared on form 8949? 

Based on the transaction history, it looks like they are properly flagging and reporting the wash sale whenever I purchased the same CUSIP within the 30 day window; however, they are not using that flagged wash sale amount to adjust the cost basis on purchases > 30 days from sale.  

For example, I had a wash sale amount of $4,453 based on a 1/24/22 sale.  My next purchase for that same stock was 3/4/22.  The $4,453 should have reduced my cost basis on the 3/4/22 purchased, but it was not reported that way.  As a result, the wash sale was never cleared

[SmartyJones]

@Critter-3   Yes, I reviewed the transactions and Robinhood, the broker, is not adjusting the cost basis.   It appears their software catches and flags whenever a subsequent purchase of the same CUSIP is made within 30 days of a loss; however, does NOT carry forward the wash sale amount to adjust the cost basis on purchases of the same CUSIP after 30 days has elapsed and as a result, the wash sale is never cleared.

It caught my attention because I sold 100% of my portfolio last September and didn't make another purchase for the remainder of 2022.  Consequently, I should have disallowed wash sales, but that's not what my 8949 is reporting.  

[SmartyJones]

** sorry, meant increase cost basis.