Hi, is there a rule on selecting the right purchase for a wash sale? For example:
1. 1/1/2018, Buy 100 shares of ABC for $1,000 from broker A
2. 1/1/2019, Buy 100 shares of ABC for $500 from broker B
3. 1/10/2019, Sell 100 shares of ABC for $600 from broker A
4. 1/25/2019, Buy 100 shares of ABC for $500 from broker A
5. 2/10/2019, Sell 100 shares of ABC for $600 from broker A
Broker A reported #3 as a wash sale on #4 and a lose of $300 on #5. Is it correct to report the wash sale as broker A reported, or the wash sale should be adjusted to the cost basis of #2 and report $100 profit on #5 instead?
yes fifo.
the sale on 1/10/19 would be those acquired 1/1/18. resulting in a loss of $400. the replacement shares would be those bought on 1/1/19 resulting in a basis of $900 - $500 paid + the $400 wash sale
the holding period tacks on so the acquisition date for these shares is 1/1/18
the 2/10 sale would be those that now have a 1/1/18 acquisition date so now there is a $300 loss - $600 selling price vs $900 adjusted basis due to previous wash sale
the replacement shares would be those purchased 1/25/19 which now have a basis of $800 - $500 paid + $300 wash sale and again the holding period would tack on so these shares would be deemed acquired 1/1/18
wash sales can become nightmares because if you were to sell at a loss in a taxable a/c and then within that 61 day window buy shares in an IRA a/c there would be a wash sale. but that loss does not tack on to the IRA shares so it's lost forever.
If you use two brokers to purchase identical shares. at the same time, then you must compute the correct wash sale disallowed amount and make the basis adjustment. The two brokers will not be in communication.
yes fifo.
the sale on 1/10/19 would be those acquired 1/1/18. resulting in a loss of $400. the replacement shares would be those bought on 1/1/19 resulting in a basis of $900 - $500 paid + the $400 wash sale
the holding period tacks on so the acquisition date for these shares is 1/1/18
the 2/10 sale would be those that now have a 1/1/18 acquisition date so now there is a $300 loss - $600 selling price vs $900 adjusted basis due to previous wash sale
the replacement shares would be those purchased 1/25/19 which now have a basis of $800 - $500 paid + $300 wash sale and again the holding period would tack on so these shares would be deemed acquired 1/1/18
wash sales can become nightmares because if you were to sell at a loss in a taxable a/c and then within that 61 day window buy shares in an IRA a/c there would be a wash sale. but that loss does not tack on to the IRA shares so it's lost forever.