Does TurboTax take care of wash sales across different brokerages - especially: Charles Schwab and Robinhood ?

[DianeW777]

No.  This takes a manual action on the part of the investor. 

Wash sales cannot be combined into section totals.  They should be entered individually so that you can track your cost basis and know when you are allowed to use the information on a final sale.

Wash Sale Rule Defined:

• A wash sale occurs when an investor sells or trades a security at a loss, and within 30 days before or after, buys another one that is substantially similar.
• It also happens if the individual sells the security at a loss, and their spouse or a company they control buys a substantially similar security within 30 days.
• The wash-sale rule prevents taxpayers from deducting a capital loss on the sale against the capital gain.

Affect on Cost Basis:

• The loss that occurs on a wash sale is added to the cost basis of the shares purchased that created the wash sale.
• When all shares are sold and there is no repurchase, that increased cost basis will be used in full and used to determine gain or loss.

Wash Sale Ends:

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. 

It's up to you to know when you no longer have to consider the wash sale rule. 

Example: 

X bought 5 shares of ZZZ stock, at $5 per share, then sold it for $3 per share, however immediately before the original 3 shares were sold, X bought another 5 shares at $5.00 per share.  

     $25 for the first block of shares

       15 is the proceeds creating a $10 loss 

The $10 loss is now added to the cost of the new shares for an overall cost basis of $35.  

Once the second block of shares is sold (5 shares with cost basis of $30) without any repurchase with in the 60 day window (30 days before or 30 days after the sale), and if they are sold at a loss, then no wash sale exists on the sale, and a loss is allowed.

You do not have to enter 4000 transactions, you can combine the wash sales into one entry, once you decide the transactions that are still open. 

[Kkulkev21]

Thanks! That’s very helpful. So, in my case

So I bought and sold 4 shares in Merril with loss of $1.67 and then bought and sold 2 shares in Schwab with loss of  $1.69. 

so, I just manually convert first sale at Merril into a wash sale and add $1.67 manually to the cost basis of stock I bought at Schwab ?

Since, I closed out the position at Schwab and didn’t make further purchases after September of 2023, I don’t need to enter the transaction at Schwab as Wash sale and can claim it as a loss for tax purposes?

 thanks!

[DianeW777]

Yes, that is correct.  As long as you did not purchase the same stock, and are not holding any more of the same stock you report the final sale and it is no longer a wash sale.

@Kkulkev21 

[Kkulkev21]

Thanks! No, after that final sale at Schwab I didn’t buy any more shares.

One last question. Since, I bought and sold 4 shares the first time at Merril and bought and sold only 2 shares at Schwab later, the difference in number of shares is immaterial to what I am going to do (adjustment of cost basis) ?

in a nutshell, take loss of $1.67 (for 4 shares) from Merril, add it to cost basis for 2 shares at Schwab and then my total loss at Schwab would be $1.67 + $ 1.69 = $3.36 ?

Thanks!

[DaveF1006]

It depends. The number of shares is immaterial if it is Substantially Similar Stock. In IRS Publication 550, it gives several examples of Wash Sale transactions and how losses are applied. 

If you lost money from your Schwab account, then the total loss would be $3.36 as illustrated in your example above. 

@Kkulkev21