topic Re: Related problem in Get your taxes done using TurboTax

Wash sale losses disallowed

codad1 — Fri, 31 May 2019 23:44:13 GMT

I did a lot of trading in 2011 with just a few ETFs and hence incurred the "wash sale" problem. My real profit was about $2500, but Schwab has reported a net gain of about $9000, because many of the wash sale losses were disallowed. All my shares were bought and sold--i.e. I don't hold any shares currently. Does anyone know how I can avoid paying tax on 'profits' I didn't have??? This must be crucial for "traders". Can this be handled in Turbotax? I also read about a product called Tradelog. Anyone have any experience with this?

It sounds to me like you are not entering the cost basis...

TomYoung — Fri, 31 May 2019 23:44:15 GMT

It sounds to me like you are not entering the cost basis of the shares that, when purchased, caused the original wash sale.  You need to go through each sale of "replacement shares" and fix this.

Let's do a simple example:

Buy 100 shares of Company A for $10/share, sell 100 shares of Company A for $9/share.
Buy 100 shares of Company A for $12/share in the wash sale window, sell 100 share of Company A for $15/share.

I'd guess Schwab's 1099-B reads

Transaction 1 : Proceeds $900 Cost $1,000 Box 5 $100
Transaction 2:  Proceeds $1,500 Cost $1,200 Box 5 $0

If you ignore the fact that the $100 wash sale loss gets ADDED to the replacement share's basis you'd report:

Transaction 1 Gain/loss $0    (loss deferred)
Transaction 2 Gain/loss $300
Total $300

If you properly tell Turbo Tax that the second lot of Company A was "purchased in a wash sale window" (that's one of the choices under the "how were these shares acquired page" then Turbo Tax asks for the amount of deferred wash sale loss that needs to be added to the purchase price of this lot, changing its basis in this case from  $1,200 to $1,300.

Now when you enter these transactions in Turbo Tax you' report

Transaction 1 Gain/loss $0
Transaction 2 Gain/loss $200
Total $200

You might easily have had a succession of wash sales in the same security (sell at a loss, buy replacement shares, sell at a loss, buy replacement shares, sell at a loss, buy replacement shares) and, in theory, you'd have to work through each successive sale of replacement shares adding the increasing amount of deferred loss to each lot.  If, however, there were no replacement shares at year end (and no subsequent purchases within the wash sale window) you could safely roll all the deferred loss into that final sale of shares.  Your "proof" that you did it right is that the total gain/loss on these transactions equals your real gain/loss on these transactions.

If you're going to be a trader you need a good understanding of the wash sale loss rules and that includes the determination of HOW MUCH loss gets deferred.  In the above example 100% of the loss was deferred, but that's not always the case.  The amount of loss that gets deferred is in proportion to the number of replacement shares purchased to the number of wash sale loss shares that were sold.

Tom Young

I just want to say that I am having the exact same issue...

sgilgert — Fri, 31 May 2019 23:44:17 GMT

I just want to say that I am having the exact same issue with Schwab and am going to try to manually enter the information (Despite many many trades) rather than uploading to see if i can get it to match the actual gain/loss. i'll keep you updated.

I THINK I understand the problem now. I reviewed my acco...

codad1 — Fri, 31 May 2019 23:44:17 GMT

I THINK I understand the problem now. I reviewed my account more closely, including the gain/loss data for Jan and Feb 2012. What appears to be going on is the wash sale losses are being carried over into 2012. Even though I didn't hold any shares on Dec 31, I bought more in early Jan, which was less than 30 days after the prior sale. The total gain/loss (which in this case is a loss), is about $6500, which accounts for the 'missing' losses I mentioned above. Not only must you have sold by Dec 31, but you cannot buy again until after Jan 30. This 30 day rule must be why the annual statements come out in February, i.e. after 30 days since the end of the last year has passed, so losses can be accounted for in the prior year if no new shares are bought. So my situation is that I'll just have to take the losses in 2012--obviously they are only being deferred, not eliminated.

Thanks Tom for pointing me in the right direction! I appreciate you taking the time and offering the good examples.

Ok, so I imagine on your 1/31/2012 statement the total lo...

sgilgert — Fri, 31 May 2019 23:44:18 GMT

Ok, so I imagine on your 1/31/2012 statement the total loss shown with wash sale impact equals the additional gain from 2011 year end?

Yes, exactly. If I want to realize the loss in 2012 I wi...

codad1 — Fri, 31 May 2019 23:44:20 GMT

Yes, exactly. If I want to realize the loss in 2012 I will have to stop trading the same funds for 30 days.

I understand the wash sale now. So I have a question. For...

guowil — Fri, 31 May 2019 23:44:22 GMT

I understand the wash sale now. So I have a question. For all those trades which caused total 6500 disallowed loss, do you have to enter those loss trading records into 2011's tax report? or you can just simple remove those and enter them with 2012 tradings when report tax for 2012? Cause finally if no wash sale anymore for the same stocks you trade, the final gain/loss amount is same, you can avoid the complicated cost base adjustment when reporting tax for 2012? Right?

Schwab knows how to handle wash sales properly and Turbo...

TomYoung — Fri, 31 May 2019 23:44:24 GMT

Schwab knows how to handle wash sales properly and Turbo Tax knows how to handle wash sales properly if the sales are entered properly.  So I don't know where you are going wrong.  It very well could be in your own understanding of the proper tax accounting for wash sales.  There's just not enough information here.

For example, you've said you've bought and sold everything and don't hold any shares currently.  If by "currently" you mean "at 12/31/2011" (and no subsequent purchases within the wash sale window) then you would have no deferred losses from wash sales at year end.  If by "currently" you mean "today" then you probably *would* have deferred losses from wash sales at year end.  The two situations produce very different reported gains and losses for 2011.

Boiled down, if you buy replacement shares after reporting a loss on a sale then the loss on the sale is deferred in proportion to the ratio of the replacement shares divided by the shares sold.  The deferred loss is added to the basis of the replacement shares.  When the replacement shares get sold the deferred loss is realized.  If this buy/sell activity all happens within the tax year then there is no deferred loss and your net gain or loss is simply the difference between the cash paid for the stock vs. the cash received on the sales.  If the "sell" part of that buy/sell activity occurs in the subsequent tax year then the loss *is* deferred.

Tom Young

Thanks for the quick reply. I did not hold any positions...

codad1 — Fri, 31 May 2019 23:44:25 GMT

Thanks for the quick reply.

I did not hold any positions as of 12/31/2011.

My year-end summary fro Schwab lists the hundreds of trades and with each entry lists the net proceeds, the cost basis, the wash sale loss disallowed, and the realized gain or loss.  At the bottom, the columns are added up, and the realized gain is the total proceeds minus the cost basis, and then minus the 'disallowed' loss, which results in a larger gain, as I mentioned initially.

What I have NOT done yet is enter the data into Turbotax, to see if the 'final' result is in line with my real gain ($2500) OR what Schwab has at the bottom of the report ($9000).  I will do that soon and then I can update my post.

I also understand that the cost basis calculation is done differently in 2011, and I'm wondering about that.  I didn't have this problem in 2010.

After entering (downloading) the data into Turbotax, the...

codad1 — Fri, 31 May 2019 23:44:27 GMT

After entering (downloading) the data into Turbotax, the "realized gain" is still the $9000 figure I mentioned. The 'wash sales disallowed' is obviously coming into play. Despite the fact that I repeatedly bought and sold these ETFs, and had no holdings as of Dec 31,2011, I must be the victim of a new accounting method for cost basis. According to Schwab the default is first in, first out (FIFO). I really have no idea what the implications of this are! I thought, as Tom suggested, that with buying and selling these shares, the wash sale rule would eventually 'cancel out', and my realized gain would be my real gain.

Am I missing something here? Should I just stop being a 'trader', because it looks like I'm going to have to pay a hell of a lot of taxes!

Still seeking help....

If your total trades are in the several millions, how do...

rsylvest — Fri, 31 May 2019 23:44:29 GMT

If your total trades are in the several millions, how do you enter the totals? Turbotax will not allow it even with override.

Does Turbo Tax figure all this out for you if you downloa...

wandywalsh — Fri, 31 May 2019 23:44:31 GMT

Does Turbo Tax figure all this out for you if you download the trades directly to Turbo Tax from your brokerage account?

Get Trade Log software...look it up! It will make it MUCH...

sparkyMike1 — Fri, 31 May 2019 23:44:32 GMT

Get Trade Log software...look it up! It will make it MUCH easier!!!

Re: Schwab knows how to handle wash sales properly and Turbo...

Businka — Tue, 14 Jul 2020 18:48:03 GMT

So I understand that amount is being adjusted when you buy a new stock after you took a loss. but what happens if you don't trade same stock after wash sale was triggered (let say wash sale was triggered because you first made a gain and then within 31 days traded again and took a loss). how then wash sale dissolves?

Re: Wash sale losses disallowed

davemaryd — Tue, 02 Feb 2021 00:03:14 GMT

We sold shares at a loss from two bond funds. The 1099-B split both sales into covered and uncovered long term. The box D transactions had small amounts Wash Sale disallowed while the Box E transactions did not. How can I tell if any or all of the Box E losses are disallowed or not?

Re: Wash sale losses disallowed

PattiF — Tue, 02 Feb 2021 20:55:22 GMT

The sales that were listed as uncovered were purchased before reporting of the purchase date was required to be reported by the brokerage firms. A wash sale is a rule that doesn't allow you to deduct losses when replacement stocks or securities were purchased within a 30-day period before of after you sold substantially identically stocks. The brokerage firm would have indicated if this occurred on the Form 1099-B. It would have been reported if there were any.

Re: It sounds to me like you are not entering the cost basis...

rmbatp — Mon, 08 Feb 2021 18:27:54 GMT

I don't know about the originator of this question, but it doesn't seem to answer the question for me. I'm using Turbotax 2020 desktop, and have 15 entries where it won't accept the very data downloaded from TD Ameritrade. None of the wash sales carried into 2021, that is I didn't trade any of those stocks this year at all. All of these sales were last year. But there were many more than 15 wash sales reported on the 1099 than 15. TurboTax didn't have a problem with those. I've looked at each individual entry on the 1099 and can find no pattern on those that were accepted and those that were flagged. But overriding the flagged trades doesn't work. There must be an answer to this. I know that each sale carries into the next trade and it all comes out in the wash anyway, but getting TurboTax to understand reason is not working.

Re: It sounds to me like you are not entering the cost basis...

JohnB5677 — Mon, 08 Feb 2021 18:59:42 GMT

Let's go back to basics.

A wash sale occurs when you sell a stock at a loss and then re-purchase essentially the same stock within 30 day (including January of a following year). In this case the loss is disallowed, and you do not get credit for it on you profit statement.

Your broker should maintain this information. The biases of the stock you re-purchased should increase by the amount of the wash sale loss. Thus the net profit or loss will be accounted for when you sell the re-purchased stock.

This then is not a TurboTax issue, but rather an issue of the maintenance of your account by your broker.

Often if you change brokers the wash sale adjustments are lost.

Re: It sounds to me like you are not entering the cost basis...

rmbatp — Mon, 08 Feb 2021 20:50:55 GMT

I know what a wash sale is. The numbers are 100% correct on the 1099. I laboriously entered each into a spreadsheet and they came out to the exact penny. I have every trade in Quicken as well. It all matches and is all correct. The problem is on the worksheet, the only way to 'fix' it is to delete the worksheet, but that's not an optimal solution.

Re: It sounds to me like you are not entering the cost basis...

JohnB5677 — Mon, 08 Feb 2021 21:38:42 GMT

Another alternative is to post a summary of the stocks.

Your brokerage statements should include a summary of your transactions, grouped by sales category, for example, "Box A short-term covered" or "Box D long-term covered." You'll enter the summary info instead of each individual transaction.

Open or continue your return (if it's not already open) and search inside TurboTax for the phrase stock sales.
Select the Jump to link in the search results.
Answer Yes to both Did you sell stocks, mutual funds, bonds, or other investments? and Did or will you receive a 1099-B form or brokerage statement for these sales?
- If you land on Here are all your 1099-B sales, select Add sales from a different brokerage. Then answer Yes to Did or will you receive a 1099-B form or brokerage statement for these sales?
When asked how you want to enter your 1099-B, select I'll type it in myself.
Select or enter your brokerage on the next screen and continue.
On the following screen (Tell us about...), answer the questions until you reach the next screen. Select the second option, Let's enter a summary instead, and select Continue.
You'll now be able to enter the total proceeds (sales) and cost basis, along with the sales category. Refer to your 1099-B for the amounts and category. When finished, select Continue.

When you are done, you'll eventually come to the Here's a summary of your broker sales screen where you can edit, delete, or enter more sales.

How do I enter a large number of stock transaction... (intuit.com)

@rmbatp