WASH SALE STOCKS

[eemr19841]

Hi

 I am using TurboTax Home & Business and i received a 1099B for stock transactions in 2020. When i entered what was reported on 1099B to Turbotax i entered proceeds $62,717.72  cost basis $65,796.04  wash sale loss disallowed $385.73  realized gain or loss ($3,078.32) but on form 8949 it shows a code W and a different loss amount of $-2,692. For another 1099B  I also get a different loss amount it creates a gain when entering the wash sale code W and instead of showing realized loss of $3,620.31 it shows a gain of $3,689. Is this correct? Any advice and help will be appreciate it.

[ThomasM125]

The "W" means there is a wash sale involved, which means you sold an investment at a loss and purchased it back less than sixty days later. The wash sale is not allowed as a tax deduction, so your realized gain is not the same as your gain reported on your tax return. You have to ignore the wash sale amount when calculating your gain as is appears on your tax return.

[eemr19841]

Thank you for your response. So I do not have to enter the wash sale loss amount in Turbotax? When I do enter the wash sale loss amount  it shows as W and box G of form 8949 but for some reason instead of a realized loss of -$3,078.32 as what it shows on 1099B from E-trade it actually adds it back creating a gain of like $4k plus. Is it correct?

[DianeW777]

Yes, that is correct assuming the the stock that originally created the wash sale is still being held by you. See the summary of wash sales next.

Wash sales cannot be combined into section totals.  They should be entered individually so that you can track your cost basis and know when you are allowed to use the information on a final sale.

Wash Sale Rule Defined:

• A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
• It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
• The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.

Affect on Cost Basis:

• The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
• When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.

As long as you are tracking the wash sales and are not using them on the tax return when you are not allowed, then you can simply enter the same cost basis as the selling price. This will  reconcile your tax return with your Form 1099-B Proceeds which is what the IRS is comparing.

Be sure to keep good records so that you know when to add those losses to cost basis for future sales.

[eemr19841]

Thank you for your response. The question that i have also is when i entered in Turbotax the information the same way it shows on the 1099B from ETRADE with the disallowed wash sale loss under "i need to enter more information" Turbotax makes an adjustment adding it back to the realized loss that it shows on ETRADE 1099B. EXAMPLE (disallowed wash sale loss of $7,250 and net realized loss ($3,215) but on form 8949 tax returns it shows code W but a GAIN under box H of $4,035 instead of a realized loss of ($3,215) like it appears on 1099B. Any guidance and help will be appreciate it. Thank you.

[eemr19841]

meaning do disallowed wash sales losses have any effect on realized gain box H or any difference on what is reported on 1099B Etrade? Does the wash sale loss need to be reported on form 8949 at all? if so i dont understand why Turbotax adds it back to the realized loss on 8949 for creating a gain which is not matching to 1099B from Etrade.

[DianeW777]

Yes, it needs to be reported and it does show as suspended. It will have an overall affect on your net gain for your tax year on your tax return because these losses cannot offset any other transactions of gain or loss.

Only you know when the stock is completely disposed of and when to add this wash sale loss to the basis of the stock for each final sale.  The broker knows when they occur, they may not always know when they are allowed to be used.

[eemr19841]

Thank you for your response. I guess what I am asking is why on form 1099B from Etrade shows disallowed wash sales LOSS of 7,375 and net realized (3,250) but when I entered the information on Turbotax on form 8949 the net realized loss  code W the net realized LOSS turns into a GAIN of $4,125 which I do not is correct.

[DianeW777]

If your wash sale losses in total are $7,375, which are not allowed if you still hold all the stocks included for wash sale as of December 31, 2020, then your gain is correct.

-3,250 overall loss including wash sale unallowed losses

7,375 adjusted for the overall wash sale unallowed losses

4,125 equals the total required reportable gain

This is the correct result based on your numbers and assuming you still hold all the stocks involved in wash sale rules. This is the part you must review to see if you do actually hold all the stocks that fell into the wash sale rules at purchase.

[eemr19841]

Thank you for the response. This can be a bit confusing because then the form 1099B should show the the gain of 4,125 under realized gain instead of a realized loss of 3,250 so it matches to form 8949 when making the adjustment. I just dont understand if is a deferred loss it should be an overall loss and not a gain.

[AmyC]

No, a deferred loss means it is not allowed right now. Instead, that amount is added to the basis of the stock you hold now instead of what you sold. When you sell the stock you own now, you will take the original cost basis and add this deferred amount to it. It is deferred until the sale of the stock you now hold that replaced the wash sale.

[ss243]

I have several wash sales and I entered code W, but the form 8949 Box A short term transaction column f shows MW, what does the M mean

[RaifH]

The M is for multiple transactions reported on the same line. In other words, you are reporting the summary sales section and not each individual transaction. 

@ss243

[ss243]

thank you

[ss243]

I report my investments in summary and need to attach the brokerage 1099s to my return   How do I do this