Wash Sale

[davetm]

I accumulated many shares of a company from April 2022 through December 17 2024.  On Dec 20 2024 I sold the shares I accumulated from April 18 2022 through December 12 2023.  Well, I screwed up because I didn't realize that the 4 shares I bought in November and December of 2024 would cause a wash sale.  So the broker increased the cost basis  of the first 4 stocks I bought in April 2022.  Guess I had that coming.  And the broker also increased the cost of the last 4 shares I bought before Dec 20 2024 (within 30 days prior to the sale) that were not sold.  Is that okay?  I wanted to see what TurboTax would do with this but I don't see how to enter the multiple lots I bought into TurboTax.  I won't be entering the purchases after 12-12-2023 so TurboTax can't do anything there.  Can someone tell me how to enter multiple lots?

Thanks for any help.

[DianeW777]

Yes. it seems you understand the 'wash sale' rules. If there was a loss on the stock sales, you must hold the loss over and add it to the cost basis of the stocks purchased in December (60 day window- 30 days before or after the sale).  You can enter one sale if you want, you just can't take a loss on the stocks that fall under the wash sale rules. For those stock sales, if there is a loss, then you should use the same selling price as cost basis on the return.  Keep you records to know the cost basis of the stock you still hold, until you sell.

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 of other stock.

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.

Wash Sale ends:

The wash sale disallowed is not added to the net gain/loss rather it is adjusted and suspended so that it does not affect the total gain or loss for any pending wash sales.  The rub is that the broker only knows when a wash sale occurs, not when a wash sale no longer exists. This can spill over between two tax years.  Likewise you can have a wash sale during a tax year, and then fully dispose of the stock in the same year which would eliminate the wash sale rule for the final sale of the same stock. 

It's up to you to know when you no longer have to consider the wash sale rule. 

Example: 

X bought 5 shares of ZZZ stock, at $5 per share, then sold it for $3 per share, however immediately before the original 3 shares were sold, X bought another 5 shares at $5.00 per share.  

     $25 for the first block of shares

       15 is the proceeds creating a $10 loss 

The $10 loss is now added to the cost of the new shares for an overall cost basis of $35.  

Once the second block of shares is sold (5 shares with cost basis of $30) without any repurchase with in the 60 day window (30 days before or 30 days after the sale), and if they are sold at a loss, then no wash sale exists on the sale, and a loss is allowed.

Please update if you have more questions and we will help.

[fanfare]

@davetm 

As long as you are using ony one broker for all buy and sell of a  security,

IRS requires the broker to track wash sales and report them to you and to the IRS.

That includes adjusted basis of triggering buy orders.

All you have to do is report the consolidated 1099-B that the broker sends you.

If you trade in several accounts or with more than one broker, or trigger wash sales by purchsing the security in tax-deferred accounts (IRAs) at the same time you are taking losses in regular account, you are provoking a reporing nightmare.

[DumbDadLTG]

@davetm 

@DianeW777 

I have similar question - I think I basically need to know how to interpret the 1099B. I've included screenshots without account Number so hopefully TT will allow them to display. This is NFS reporting, so have to assume it's fairly common. Addressing one of Dave's comments, all my transactions were completed with one broker and are all reflected on this statement. So I see summary LT gain, Loss and disallowed wash values (Screenshot).

My question  is, in my case, has the 1e cost for the line items containing the disallowed wash transactions (also included that screenshot) already been adjusted (down) to reflect the non-allowed portion, OR..... do I need to enter that summary disallowed amt in the TT adjustment box and check "W" (see last screen shot).

Thank you,

[fanfare]

IRS requires details of your Wash Sales transactions to be supplied on some Form 8949,
or on your other forms (e.g. consolidated 1099-B or spreadsheet) which have the same information and in the same manner as Form 8949.

This is so, even when the broker has sent details to the IRS already.

The basis adjustment goes on the triggering shares you bought.

These are not reported as adjusted. Go figure.

@DumbDadLTG