Does Wash Sale really matter if the other purchase within the 30 day window was sold within the same year?

[timoooshy]

Let's say I bought ABC stock on 4/1 and sold it on 4/25 with a loss but re-bought the stock within the 30 day window and bought it on 4/5 and sold it on either 4/15 (case A) or even 4/27 (case B) for a loss. Since ABC stock wasn't intended to be a replacement, does the net amount loss change (or wash sales really matter)?

It seems like the cost basis will change but eventually the net loss will the be the same amount.

Hope I'm making sense.

For case A: the cost basis for the initial purchase will go up?

For case B: the cost basis for second purchase will go up?

Is this correct?

[DianeW777]

Yes, it does matter. If you don't have a loss then the wash sale rules do not apply.  If you have a loss then if you repurchased the same stock within the 60 day window (30 days before or 30 days after a sale at a loss) the loss is added to the stock you still own until you sell it without a repurchase during that same window. Until fully disposed of without a repurchase, the wash sale loss cannot offset any gains from other stock.

Please update here if you need further assistance and one of our tax experts will help you.

[timoooshy]

@DianeW777 @Thanks for the reply. Maybe the question wasn't clear

Basically, if I sold at a loss and re-bought the stock within the 30 day window and sold it again without another repurchase. The wash sale will be applied but the net loss will still be the same? 

Hopefully that makes sense?

Example & Calculation:

Also just to add, if I bought stock 10 of ABC stock on 4/1 for $10/share and bought 20 more on 4/5 for $10/share and sold  20 stocks on 4/15 with a loss ($5/share) and then the rest on 4/25 (10 stocks for $2/share). I assume that 50% of the loss sold on 4/5 will be disallowed and added to the cost basis to 50% of the stock sold on 4/15.

4/1 and 4/5 : Cost basis of the 30 initial stocks = $30x10 = $300

4/15 : -$50 loss and the $50 disallowed

4/25: cost basis is $10x10+$50 (disallowed added to cost basis)  and sold for $2/sharex10

150-20=$130

Net loss is -$130-50=-$180

Without considering wash sale:

-$5x20-$8x10=-$180

[DianeW777]

The cost basis of $150 ($10x10+$50), in your example includes the wash sale loss.  When you sold the remaining 10 shares at $2 per share that is the selling price the entire loss is allowed if you did not purchase any additional stock with in the 60 day window.

• $150 - $20 = $130 loss allowed in full

[timoooshy]

@DianeW777 

Thanks for the reply. You're really helping me understanding what is going on.

Just to make sure I'm understanding:

1) I understand that the $130 loss allowed in full applies to the last 10 shares - which makes sense (accounting for the previous 10 shares with wash sales).

2) What about the previous loss of $50 in the previous sale for the 10 shares? Would that be allowed as well (for a net loss of $180 for that year = $130 + $50)? If the first loss of $50 is not allowed, would that then add $100 to the cost basis?

3) "The 60 day window" phrase seems a little confusing to me fore few reasons:

CASE A) if a bought it on 4/1 and bought again on 4/5 and sold everything on 4/15 and 4/25 (both with a loss), how would the 60 day window apply? From the perspective of both sales, either 4/1 and 4/5 is within the -30 day window. Shouldn't the phrasing be, "60 day window unless you sold all the assets bought during that time period and not purchase any additional ones in the +30 day window" or was that what you mean in that sentence "if you did not purchase any additional stock with in the 60 day window".

Let me know if I'm not making any sense. I really appreciate it.

[DianeW777]

The previous $50 loss is already added to the cost basis to reduce any future gain or increase a loss simply because you already added it to your cost basis.  

• In your example the cost basis would be $100 ($10x10) minus selling price of $20 = $80 loss 
• The fact that we added the $50 to the cost basis creates the final and total loss of $130.

No, you cannot add it again to the loss because it is already accounted for by an increased cost basis.

In your case everything was handled very close together so you aren't dealing with the full 60 day window, which is the purchase of the same stock 30 days before the sale and 30 days after the sale.

Your statement: Shouldn't the phrasing be, "60 day window unless you sold all the assets bought during that time period and not purchase any additional ones in the +30 day window" or was that what you mean in that sentence "if you did not purchase any additional stock with in the 60 day window".

• Yes, that's exactly what I meant. And you are making sense.

[fanfare]

@timoooshy 

The IRS requires your broker to track all this and put it on your consolidated 1099-B.

You don't have to worry about it or even understand it (it's not so very complicated).

If you are very active in the same security a lot of transactions can be impacted.

Just report what your 1099-B says.

[timoooshy]

@DianeW777 

Sorry - I think I wasn't clear in my description and also my misunderstanding.

I guess the first sale was a loss of $100. (Sold 20 for a $5/share loss).

I thought that there was a 1:1 relationship.

So the 20 stocks I first sold on 4/15 will be coming from 4/1 (10 shares) and 4/5 (10 shares). So I thought the 10 shares coming from 4/1 will be a wash sale (-$50 will be added to the cost basis to the last 10 shares I sold on 4/25) while the shares coming from 4/5 will is not a wash sale where I can claim a -$50 loss right there. Since the last sale on 4/25 is a total loss of $-130, the net loss is still -$130-$50=-$180 which is the same as not even having the wash sale to begin with since I did get rid of my entire position in the same year.

Let me know if I'm understanding incorrectly.

Sincerely,

Someone in their 20s trying to understand 😃

Example & Calculation:

Also just to add, if I bought stock 10 of ABC stock on 4/1 for $10/share and bought 20 more on 4/5 for $10/share and sold 20 stocks on 4/15 with a loss ($5/share) and then the rest on 4/25 (10 stocks for $2/share). I assume that 50% of the loss sold on 4/5 will be disallowed and added to the cost basis to 50% of the stock sold on 4/15.

4/1 and 4/5 : Cost basis of the 30 initial stocks = $30x10 = $300

4/15 : -$50 loss and the $50 disallowed

4/25: cost basis is $10x10+$50 (disallowed added to cost basis) and sold for $2/sharex10

150-20=$130

Net loss is -$130-50=-$180

Without considering wash sale:

-$5x20-$8x10=-$180

@fan- correct but if I understand correctly, not if I have multiple brokerage accounts =(. If Turbotax could adjust it, that would be great...

[fanfare]

@timoooshy 

If you understand about multiple brokerages, then you understand that a BUY with broker B can trigger wash sale with Broker A.

The loss with Broker A is disallowed and the BUY with broker B is adjusted.

You have to do these adjustments yourself, since your brokers don't exchange information about you.

This state of affairs is best avoided.

[timoooshy]

@DianeW777 

@fanfare 

I do understand that having multiple brokerage accounts don't take into account of it and that's why I'm doing it manually.

Does the calculations above make sense?

Thanks

[fanfare]

@timoooshy 

I'm in no mood to do wash sale arithmetic.

I'm still waiting for my 2020 tax refund.