My Form 1099-B shows wash sale loss even though I sold ALL the shares

[ga hiker]

My mutual fund paid a dividend and a long-term gain on 12/16/22 which I reinvested. On 12/29 I sold ALL of my shares of that fund at a loss.  My 1099 is reducing my loss due to a wash sale. Is that correct, considering that I sold ALL of my shares? If I had retained some shares or bought some new ones in the 30 days after the sale, I understand that the amount of the reduction would be added to the basis of those shares so I wouldn't lose the  benefit of the loss completely. It seems to me that if I sold all the shares there should not be a reduction for a wash sale. Please advise. Thank you.

[GeorgeM777]

The wash sale period includes not only the period 30 days after the sale but also 30 days before the sale date.  Thus, the wash sale rule includes a 61 day period.  From you post, it does not appear that your entire loss was disallowed, just some portion of it.  Without knowing your full transaction history for the period at issue, it could be that the reinvested shares triggered the wash sale rule because reinvested shares represent a purchase.  

@ga hiker 

[ga hiker]

Thank you for your reply. Yes, the reinvested shares would definitely trigger a wash sale and the amount of the unallowed loss would be added to the basis of those shares. But I sold those shares along with all other shares I held in that fund so I believe the net result should be no "penalty" at all.  Am I missing something?

[rjs]

You haven't said whether the disallowed wash sale loss was added to the basis of the shares purchased by the reinvestment. Does the 1099-B report the sale of the shares purchased on 12/16/22 separately from the sale of the older shares? If it reports all of the shares lumped together in a single sale, it might be hard to figure out how the basis was calculated. It's even harder if you had many small purchases from reinvestments over the years, and if the fund used average basis. You could ask the mutual fund company whether the reported basis was adjusted for the disallowed wash sale loss.

[ga hiker]

Thank you for your response!! After much digging down into the 1099-B and the brokerage year-end statement, I can confirm that, yes, the basis of the reinvested shares does seem to have been increased by about the amount of the disallowed wash sale loss. With much effort I have finally been able to reconcile those documents with the numbers I get from Quicken. It doesn't help that the 1099-B, although it shows lot detail, does not have cost info for uncovered shares. Thank you!

[fanfare]

closing out all your positions, does not absolve you of the IRS requirement to report details of all transactions with adjustments.  Wash sales have an adjustment.

interestingly, the triggering transaction, also has an adjusted cost basis but that is not reported as an adjustment on your 1099-B. Go figure.

a triggering transaction has to occur within+/- thirty days, it is definitely going to be a covered transaction.

the brokerage or mutual fund is required to track your basis.

@ga hiker 

[ga hiker]

Quote from one of my previous posts:

" After much digging down into the 1099-B and the brokerage year-end statement, I can confirm that, yes, the basis of the reinvested shares does seem to have been increased by about the amount of the disallowed wash sale loss. "

Bottom line, after much work, I can confirm that having closed out all the shares in my holding gave the same total result as I would have had if there were no wash sale rules.

Interestingly, I closed out my holdings in 2 other mutual funds held at a different investment company, also in December. Both had the same pattern of many years of nothing but reinvested distributions, including ones less than 30 days before the sales. Those 1099-Bs show no evidence of wash sales -- "Box 1g, Wash sale loss disallowed" is blank. I even called them in an effort to understand the situation and was told, "There is no wash sale."