Is either of these situations considered a wash sale?

[RedCab]

Please consider these 2 scenarios and tell me if a wash sale has occurred and the proper handling...

Scenario A:

I purchase 300 shares XYZ for $80 each for a total cost of $24,000 on Feb 1.

I sell 100 shares XYZ for $60 each on Feb 15, generating $6000 cash. At least on paper I absorbed a $2000 loss on those shares I just sold. Not sure, but I believe the loss will have to be pushed forward until I sell the remaining shares. The basis for the remaining 200 shares will increase from $80 to $90 (= $2000) as balancing offset. Can you confirm?

Scenario B:

I purchase 300 shares XYZ for $80 each for a total cost of $24,000 on Feb 1.

I sell all 300 shares XYZ for $60 each on Feb 15, generating $18,000 cash.

I no longer hold any position in any account of XYZ

Am I able to claim the $6000 loss immediately? Or do wash rules apply?

[dmertz · Accepted solution]

Both cases are wash sales.

In case A, you sold shares at a loss within 30 days (before or after) of purchasing identical shares.  Your brokerage statement should show sales proceeds of $6,000, basis on the 100 shares sold of $8,000 and a wash-sale adjustment of $2,000.  As you indicated, your total basis in the remaining 200 shares is increased by $2,000 or $10/share.

In case B, you also sold shares at a loss within 30 days of purchasing identical shares.  Your brokerage statement should show sales proceeds of $18,000, basis of $30,000 (the original $24,000 purchase price plus the disallowed loss of $6,000) and a wash-sale adjustment of $6,000.  When reported on your tax return, the result will be a $18,000 - $30,000 =  a loss of $12,000, plus an adjustment for $6,000 of disallowed loss for a net reportable loss of $6,000.

[dmertz]

I've made a slight adjustment to the way I described the calculation on the tax return for case B, but the intent is the same.  Because all of the shares are sold, the additional basis applied to the sale of all of the shares is cancelled out by the disallowed loss.  The net effect is the same as if there was no wash sale, but it's still a wash sale.

[RedCab]

Got it... so wash rules apply, but the net effect is that by completely liquidating the position the loss can be taken at the time of the sale.

[dmertz]

Yes.  In TurboTax, simply enter the Form 1099-B as received and TurboTax will report it accordingly.  (I assume that we are talking about a transaction made sometime in the last few years, resulting in these being covered shares where the broker is required to track basis.)

[lstone19]

Scottrade has some examples on their website that cover this (I'm not sure if a link to it is permitted here but a quick search should let you find it).

Scenario B is not a wash sale as you've closed out your position and there are no "replacement shares".

For scenario A, it depends on whether the initial 300 share purchase was one transaction or more than one. If one transaction, then not a wash sale as there are no "replacement shares". But if more than one transaction (e.g. you bought 100, then 200 more), then it is a wash sale as that initial buy of 100 would be considered the "replacement shares".

What this ends up meaning (although I've not heard it put this way before) is that there can not be a wash sale until there have been at least two separate purchases (one considered the original purchase and one considered the purchase of the "replacement shares").