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AmazingMars
Level 1

Wash Sale Rule Across Taxable & Non-Taxable Accounts

I have 200 shares of stock A in my taxable account, 50 shares purchased within the last 30 days, 150 shares purchased >30 days ago, currently holding at a loss.

For tax loss harvesting purposes, I just sold all 200 shares today and plan to buy them back after 30 days.

My understanding of how the wash sale rule could play out are as follows:

1) If I re-purchase stock A after 30 days say Dec 26, 2021, but before January 1st, 2022, it is then considered that I have an open position for 2021 tax year. Doing this generates tax loss for 150 shares out of 200. The 50 shares I purchased during the last 30 days washes out some of the sold shares at a 1:1 ratio.

2) If I re-purchase stock A in 2022 say on January 1st 2022, it would be considered that my stock A position is closed for tax year 2021, and tax loss can be claimed on all 200 shares.

Is the above understanding correct? 

 

What makes it difficult for me find a definitive answer, is that I also have a non-taxable account holding 50 shares of BABA purchased >30 days ago.

a) If I don't sell this 50 shares and keep them in my non-taxable account, what happens to scenario 1 & 2 above?

b) If I want to maximize my tax loss harvesting this year, is my only option to sell these 50 shares now as well?

 

Lastly I'm trading from Canada - although the capital gain taxations are different, I'm pretty sure the rules around washed sales are very much the same in the US & Canada.

 

Any answers to my questions, or advice from a tax point of view would be much appreciated!

1 Best answer

Accepted Solutions
Mike9241
Level 15

Wash Sale Rule Across Taxable & Non-Taxable Accounts

1) If I re-purchase stock A after 30 days say Dec 26, 2021. STOP. it's the 30 day period before or after the sale that is the wash sale period. if you replace some or all of the loss shares outside this period there is no wash sale.

it is then considered that I have an open position for 2021 tax year. Irrelevant for your example.

 

Doing this generates tax loss for 150 shares out of 200. The 50 shares I purchased during the last 30 days washes out some of the sold shares at a 1:1 ratio.  NO read number 1).  you sold 200 shares at a loss on 11/25 (trade date) on 12/26 (trade date) which is more than 30 days after the sale you buy another 200 shares of the same stock. since this purchase is outside the wash sale period, there is no wash sale on any of the shares

2) If I re-purchase stock A in 2022 say on January 1st 2022, it would be considered that my stock A position is closed for tax year 2021, and tax loss can be claimed on all 200 shares. 

this is irrelevant since years don't matter. only 30 days. so if you sold at a loss on 12/25/2021 and bought substantially identical shares on 1/15/2022 you would have wash sale on the 12/25 sale so no loss would be reported for these shares in 2021

 

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9 Replies
Mike9241
Level 15

Wash Sale Rule Across Taxable & Non-Taxable Accounts

1) If I re-purchase stock A after 30 days say Dec 26, 2021. STOP. it's the 30 day period before or after the sale that is the wash sale period. if you replace some or all of the loss shares outside this period there is no wash sale.

it is then considered that I have an open position for 2021 tax year. Irrelevant for your example.

 

Doing this generates tax loss for 150 shares out of 200. The 50 shares I purchased during the last 30 days washes out some of the sold shares at a 1:1 ratio.  NO read number 1).  you sold 200 shares at a loss on 11/25 (trade date) on 12/26 (trade date) which is more than 30 days after the sale you buy another 200 shares of the same stock. since this purchase is outside the wash sale period, there is no wash sale on any of the shares

2) If I re-purchase stock A in 2022 say on January 1st 2022, it would be considered that my stock A position is closed for tax year 2021, and tax loss can be claimed on all 200 shares. 

this is irrelevant since years don't matter. only 30 days. so if you sold at a loss on 12/25/2021 and bought substantially identical shares on 1/15/2022 you would have wash sale on the 12/25 sale so no loss would be reported for these shares in 2021

 

View solution in original post

AmazingMars
Level 1

Wash Sale Rule Across Taxable & Non-Taxable Accounts

Thank you Mike for the clear explanations. It seems that with more readings on this subject I've confused myself on some simple principles.

 

Could you elaborate on the 2nd part of my question, regarding my position in the same company stock in my non-taxable account? Do I need to sell those as well, to achieve a fully closed position across all my accounts, for tax loss harvesting purposes of the 200 shares I've now sold in my taxable account?

Mike9241
Level 15

Wash Sale Rule Across Taxable & Non-Taxable Accounts

I thought I made it clear that if you don't have a wash sale for shares sold at a loss then whether you still have a position in them at year-end is irrelevant. if there is no wash sale, you get to take the loss in the year of sale. I should point out that 30 day period would include the same period in an IRA. if you sell at a loss in your regular a/c and buy replacement shares in your IRA within the wash sale period, your loss is not allowed and is permanently lost because the basis is not adjusted for the IRA shares,

 

however, if you were to sell shares at a loss in your IRA a/c and within the wash sale period buy replacement shares in a taxable a/c there is no wash sale, That's because the loss is not a taxable event.  

 

IRA includes all IRA types as well as solo 401k's 

if you are married you and your spouse are treated as one taxpayer.

 

fanfare
Level 15

Wash Sale Rule Across Taxable & Non-Taxable Accounts

in order to sell N shares and take a loss on 2021 taxes , you have to STOP BUYING.

But if you already purchased more identical shares before you sold the N shares, and the interval was thirty days or less, your loss deduction is denied in part or in full depending on the number M of identical shares..

selling more shares in a tax deferred account does nothing for you since that is never reported.

AmazingMars
Level 1

Wash Sale Rule Across Taxable & Non-Taxable Accounts

Thanks for the additional clarifications. What got me confused is that when I was researching on this topic, somehow it gave me an impression that having a closed position across all accounts is a pre-requisite to claim tax losses or avoid washed sales in some cases.

In reality, it is not that complicated as long as the 30 day principle is followed.

AmazingMars
Level 1

Wash Sale Rule Across Taxable & Non-Taxable Accounts

Thanks for the reply, it is now very clear to me. 

fanfare
Level 15

Wash Sale Rule Across Taxable & Non-Taxable Accounts

"in  some cases."

 

If your loss is denied because you previously bought M shares, then yes you would have to close out the M shares also before year-end.

 

If you are a trader, it all works out in the end and your broker does the hard work of keeping track of it all.

AmazingMars
Level 1

Wash Sale Rule Across Taxable & Non-Taxable Accounts

I see, so an example would be:

Dec 28, 2021 bought M stock

Dec 29, 2021 sold M stock at a loss

If there's no open position for M stock across all accounts, and no new trades were made for 30 calendar days after the last sell, tax loss can be claimed for year 2021.

If there's still an open position for M stock at year end, then tax loss will have to be deferred to year 2022 or later.

fanfare
Level 15

Wash Sale Rule Across Taxable & Non-Taxable Accounts

"If there's still an open position for M stock at year end, then tax loss will have to be deferred to year 2022 or later."

 

No, that's not what I said.

Please reread. You're still confused.

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