Wash sales question

[j g]

Say I buy 10 shares at 100, price drops to 10, I buy 100 shares at 10.

Price then goes to 50, and I sell all 110 shares.

The 10 shares I bought at 100 is not any worry about a wash sale? Couldn't possibly be, my guess. But better not to discover that it is, some 3 years after taxes all done improperly.

[Mike9241]

you have a loss on the 10 shares you bought at 100 and sold at 50. on the same date, you have a gain on the 100 shares you bought at 10  and sold for 50.  at this point, you have no position in the security. if within 31 days of the sale you were to purchase the same security you would have a wash sale on the shares sold at a loss.

however, if these shares are of a mutual fund and you use the average cost method then your average cost would be 2000/110 (a little over 18 per share) resulting in a gain on all shares sold.

[j g]

I should have mentioned all shares are in the same account and averaged in within the same account at my broker. My broker averages-in the buys in a Positions Manager/Display. My broker's display shows me the average cost displayed as you are describing with your mutual fund.  They are averaged in buying on different days but all sold on the same day.  I would think the thing you're saying as to mutual funds would also apply here, wouldn't it?

[Mike9241]

when you use a brokerage you get to choose a default method for tracking tax basis.  every broker I've seen that allows online viewing of an account displayd each security on one line with the total cost and total market value.  this is not the same as using average cost when selling.  the best way to find out what method is being used is to talk to your broker.

[fanfare]

any lot on which you have a gain cannot be a wash sale.

wash sale means your loss deduction is denied.

BUT

Gains can turn into losses if you generate a lot of wash sales.