Loss disallowed due to wash sale - do I need to adjust basis?

[kak531]

I have a Morgan Stanley account where I receive RSU’s as part of my compensation. I just found out the hard way that RSU releases could trigger wash sales if I sold older shares with a higher basis <30-days after the RSU releases. On my 1099-B, it listed $1000 of “disallowed wash sales” that I wonder if I need to make adjustments for somehow. Below is a simplified (yet still complicated) summary of what happened:
                                                                                                                        Shares
1/1/19 Opening Balance                                                                           8,500
3/1/19 3,000 New RSU’s released @$9                                                 11,500
3/11/19 Sold 2,000 older RSU’s @$8.50 (basis ~$15)                          9,500

3/19/19 Sold 4,000 shares @$8.50 (incl ALL 3/1/19 RSU's)                 5,500

For 3/11 Sale: 1099-B lists $1k of $3k in losses from 400 shares of “covered” LT losses as "wash sale loss disallowed".  It also lists $10k in losses from 1600 shares of “non-covered” LT losses – no mention of any wash sales being disallowed, but there is a disclaimer that non-covered securities are not subject to IRS reporting requirements and may not reflect all adjustments required by law - not sure how to interpret that...thanks MS.

3/19 Sale included ALL 3/1/19 RSU’s, their basis remained at $9, no sign of any basis adjustments in the transaction details. 1099-B reported ST losses of ~$1500 (from RSU’s released on 3/1, and ~$1200 LT losses on older RSU’s).

Reviewing the 1099-B and transaction details, I don’t see any basis adjustments to the RSU prices that account for the $1k wash sale loss that was disallowed. Given I sold ALL the RSU’s that were released within the 30-day wash sale window I would think they should be zeroed out somehow. I entered the 1099-B sale details into TT (exactly as listed by MS), but date acquired was listed as VARIOUS for the older ones that were grouped together as the original purchase details are far more complicated and I wasn’t sure if I needed to adjust the basis of any of them vs the 1099-B details provided by MS.

At this point, I’ve entered the 1009-B info exactly as its listed by MS with no further adjustments.

[DianeC958]

No, you do not adjust your basis. The wash sale rule doesn't allow you to deduct losses when you buy replacement stocks or securities (including contracts or options within a 30-day period) either before or after you sold substantially identical securities.

The rule doesn't apply if you're a securities dealer and the trade was part of your business activity.

The tax or cost basis of the replacement securities is the new cost increased by the disallowed loss. This applies even if you buy the replacement stock in a different account. Buying the replacement stock in an IRA can be especially painful since cost basis isn't typically recognized in these accounts. Therefore, the loss on the sale would be lost.

Tip: If you purchased and sold stock at a loss within 30 days, but didn't purchase or acquire substantially identical stock or securities, you have a short-term capital loss instead of a wash sale.

[kak531]

Thanks for your response, but I'm confused by what you said:

     "No, you do not adjust your basis." ......  then later you said:

     "The tax or cost basis of the replacement securities is the new cost increased by the disallowed loss."

So my question is should I adjust the basis of the replacement securities (and if so, how in TT).  

    -Every WASH example I have seen shows a SELL 1st then a BUY 2nd within 30days.

    -In my case, I had a BUY 1st, then SOLD older shares for a loss within 30days.  So I think I need to add the disallowed loss to the basis of the shares BOUGHT (which I eventually sold to close out the WASH sale).

[JohnB5677 · Accepted solution]

Often the broker's software will help make this adjustment, but yes you should keep track of the wash sales and you correctly stated how to calculate the adjustment. 

To make this adjustment in the turboTax software you would enter the transaction exactly as it show on the 1099-B. After entering the data there is a bar at the bottom of the screen that says "I'll enter additional info on my own."  Toward the bottom there is an option to "Correct The Cost Basis".  You can make the adjustment here.

[theMathProf]

I have a different wash sale problem. I never made the wash sale. Yet it appears on my CURRENT broker's 1099-B with an amount of $454.20.. My current broker tells me that they just copied the information from what my previous broker/trustee sent them. My previous broker confirmed that there was no wash sale but cannot do anything.

What do I need to do with that $454.20 item?  Should I ignore it? Will that affect my tax ?