2 Accounts, Same Bought Symbol in Each, Wash Sale Question:

[j g]

Scenario: In one account I bought 10 shares of IBM 2 years ago. In the other, I bought 10 shares of IBM 2 weeks ago. I am the sole owner and operator of both accounts. There are no other buys of IBM at anytime other than just described.

Suddenly I sell (actual sale 1) the 10 shares bought 2 years ago at a loss.
The next day the shares of IBM I bought 2 weeks ago are significantly higher in price, so if I sold them (potential sale 2) it would be a gain. 

BUT, do I have to wait 30 days to sell these bought 2 weeks ago (potential sale 2)  to avoid the ones I sold after 2 years (actual sale 1) - to avoid actual sale 1 being a wash sale?

How do I proceed with the shares bought 2 weeks ago to avoid a wash sale?

[RaifH]

No, you do not have to wait to sell the shares you purchased two weeks ago. Wash sales occur if you rebuy the sold stock within 30 days of selling it. Selling additional stock within 30 days does not trigger a wash sale. 

If you were to rebuy IBM stock within the 30 day period following the sale, then that loss would be considered a wash sale. It does not matter which brokerage account you purchase the stock from. The brokerage you sold the IBM stock would know that it is a wash sale and treat it appropriately on Form 1099-B. If you bought the shares at another brokerage, they would not know that it triggered a wash sale and the onus would be upon you to report everything accurately. 

[j g]

I really appreciate your answer - not just "what I wanted to hear." I think you're right.

On this:

"If you were to rebuy IBM stock within the 30 day period following the sale, then that loss would be considered a wash sale."

When you say "that loss" with the previous sentence - this is why I labeled each buy and sell with a name, for specific reference  - you mean "that loss" to be the loss on (actual sale 1)? Or any sale, loss or gain on this new IBM purchase you made within 30 days after (actual sale 1)?

Then also: but if I did buy (buy x) within the 30 day period, then sold this buy (buy x) within a few days AT A GAIN, I presume the previous sale (actual sale 1- the one I sold after holding 2 years) would still be a wash sale?

[JohnB5677]

If we say the purchase 2 years ago is Lot 1, and the one 2 weeks ago is lot 2.

When you sold Lot 1 at a loss it triggered the possibility of a wash sale.  If lot 2 was purchased within 30 days before or after the sale of lot 1 you do have a wash sale and no loss can be taken, but it will be added to the basis of lot 2.  When you sell Lot 2 the profit or loss will be evaluated based on the new cost basis.

Additionally, shares at different brokers are considered in total for tax purposes (wash sales). You cannot take a loss in one account and then replace them with substantially identical security in another account (within the 30-day window before or after the loss date).

The IRS considers First In First Out.  If you sold Lot 2  it would be considered as if you were selling Lot 1 for tax purposes.

This all causes mental gymnastics, and when possible should be avoided.

[JohnB5677]

If we say the purchase 2 years ago is Lot 1, and the one 2 weeks ago is lot 2.

When you sold Lot 1 at a loss it triggered the possibility of a wash sale.  If lot 2 was purchased within 30 days before or after the sale of lot 1 you do have a wash sale and no loss can be taken, but it will be added to the basis of lot 2.  When you sell Lot 2 the profit or loss will be evaluated based on the new cost basis.

Additionally, shares at different brokers are considered in total for tax purposes (wash sales). You cannot take a loss in one account and then replace them with substantially identical security in another account (within the 30-day window before or after the loss date).

The IRS considers First In First Out.  If you sold Lot 2  it would be considered as if you were selling Lot 1 for tax purposes.

This all causes mental gymnastics, and when possible should be avoided.

[j g]

JohnB5677:

 "If lot 2 was purchased within 30 days BEFORE or AFTER."

This is the very first I've noticed that "BEFORE," too. I'm incredibly slow, never thinking it might be the case.

You're an expert, and thus you must be right. Allow  me a work-thru example:

The following all happening in a September of the same year:

In September, on the 5th, 10th and 15th, on each day I buy10 shares IBM then sell 2 days later, in all cases they're a gain. On September 25th I buy 10 IBM again but sell 2 days later at a loss.

The buy of September 25th is therefore a wash sale, right? And any one of the buys of the 5th, 10th and 15th could have triggered it alone? Thanks in advance.

[DianeW777]

It depends. See the two scenarios below.

1. Yes, any one of the buys could have triggered the wash sale of the original shares. The sale of September 25th is a wash sale if you still hold some of the stock that was purchased on the 5th, 10th or 15th.  
2. No, if all of the same stock was fully disposed of when you sold the last lot purchased on the 25th. This assumes you no longer hold any of that stock.

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. If this fits your situation, then you do NOT have a wash sale on September 25th.

Wash sales must always be tracked for basis by you.

@j g

[j g]

Sorry I didn't seem clear.

I intend to have said that I became flat IBM 2 days after each buy of the 5th, 10th, 15th and 25th. Each of the 4 buys went to flat 2 days later. The first 3 buys were gains. The buy of the 25th was exited at a loss. This is the situation I want to determine as to the existence of a wash sale. 

Under these circumstances, the loss 2 days after the buy on the 25th is a wash sale, right? Thanks.

[DianeW777]

Only if you still hold any of the same stock.  If you no longer hold any of the same stock, the wash sale is done and the loss is allowed.

[Tax2019Pay]

Hi JohnB5677 or other experts:

I would like to follow up on your response on wash sale with a hypothetical example.

If one bought a total of 500 shares of stock A in the first brokerage account  at different times between Jan 2022 and October 2022, and bought a total of 75 shares of stock A in the second brokerage account on Nov 1, 2022.  She sold all 500 shares of stock A in the first brokerage account at a loss on Dec 1, 2022.

How does she match the wash sale shares across the 2 brokerage accounts?  Are the very first 75 shares of stock A bought in the first brokerage account subject to wash sale rule and one cannot claim loss for these shares?

Thanks.

[NCperson]

@Tax2019Pay - when the 600 shares were sold, which lots were sold? which lots, if any, were remaining?

of the lots that were sold that made up the 600 shares, by rule, the lot with the oldest purchase date is the loss that is disallowed.  

In your example, did you mean for there to be 500 shares purchased at the 1st brokerage but there to be 600 sales, that suggests thare more lots than what is in your example (or there is a  hypothetical short sale???)

[Tax2019Pay]

Sorry, I corrected my question - 500 shares not 600 shares

[NCperson]

@Tax2019Pay , yes, if 500 purchased at Broker A, 75 purchased at Broker B, then 500 sold at Broker A, then the loss calculated on the 1st 75 shares purchased at Broker A is disallowed - the rule is to use the oldest lot when multiple lots are involved. 

the washsale rule has to do with ownership, and has nothing to do with the number of brokers the shares are placed at. 

that disallowed loss recoreded at Broker A can be used to increase the cost basis of the 75 shares held at Broker B.

[Tax2019Pay]

Super clear. Thank you.  Sorry for the error in the original post.  Appreciate very much.

Three follow up question: In reporting the wash sale in TurboTax, if the original shares in the 1st brokerage account are purchased on the same day in 4 lots: 50 shares, 50 shares, 25shares and 25 shares (timing of the purchase on that day is no longer available on the brokerage website), one should match the 1st 50 shares and first 25 shares with the 75 share wash-sale disallowed in brokerage 2, instead of matching the 1st 50 shares and 1/2 of the 2nd 50 shares?  The prices were very similar.

Can one combine the 1st 75 shares to report the wash sale or does one have to report 2 separate entries - one 50 shares and one 25 shares?

Is there anything additional needs to be mailed to IRS in addition to TurboTax efile (knowing that brokerage firms will send 1099B to the IRS and TurboTax will automatically generated a form 8949 based on information entered)?

Thanks again for the advice.

[NCperson]

@Tax2019Pay 

1)  since there were 4 lots purchased the same day and the chronological order is no longer known.doesn't appear you have a choice.

2) don't combine; when entering the sale in TT, there is a box to be filled out called 'disallowed washsale' ; this should be the difference between the sales price and the cost basis

3) I do not see that it is necessary since you are not changing the sales proceed numbers or the cost basis numbers that the broker will report, I can't see the iRS will care,m esp since it will be clear the difference is the wash sale..  E-file if you can; the return will be processed much quicker vs. paper filing. 

you could resolve this whole issue if you sold the 75 shares at Broker B today 🙂