Wash Sale & Cost Basis Adjustment

[Anonymous]

but the taxpayer has other shares so on a fifo basis the first shares bought would be the first shares sold and those first 100 don't involve the wash sale.  to get the wash sale loss you have to sell the shares to which the was sale loss was added.  That's the way my broker does it and the way I understand the wash sale laws. 

[otaclik]

I expect I will lose the loss If I never purchase the shares that created the wash sale. Is this a fact?; I would expect so. And if I never report the wash sale, I'm the loser since if i did repurchase the shares, I would not be able to increase my cost base and consequently would report a larger capital gain if sold at a profit??

Am I obligated by IRS to report wash sales. Why should they care; i would be the loser.

[elbee]

i tried to find this thread a few weeks ago to report back on the resolution of my 100 lot sale (at a loss) vs. a 200 lot purchase 2 weeks later (via a put exercise) that resulted in a wash sale.  my broker was attributing/booking  the disallowed wash sale loss to the full 200 share purchase.  it took me 4 months of emails and multiple phone calls to FINALLY get someone to agree, the loss should only be applied to 100 shares of the 200 lot purchase.   it took them another week to finally manually correct their records to reflect the 200 lot purchase correctly -- 100 lot with basis adjusted for the disallowed loss and proper holding date of the wash sale shares,  and100 lot with the put premium adjusted basis and put assignment date holding period.   apparently, the put exercise "confused" their system.  🙂

FYI, my 2020 Form 1099-B has a column 1g "Wash Sale/Loss Disallowed" for the specific 100 lot sale that is reported to the IRS.

[elbee]

@otaclick

i'm not sure i understand your question... the wash sale rule exists because the IRS does not want you booking losses on a stock just for tax purposes and then buying back the stock "right away".   whenever the purchase/sale of an "identical" security happens within 30 days of each other, a wash sale may be triggered if there was a loss on the sale.  

>>I expect I will lose the loss If I never purchase the shares that created the wash sale.<<

if you don't buy shares within 30 days of selling shares at a loss, there is no wash sale event.

[JohnB5677]

You said  "I expect I will lose the loss If I never purchase the shares that created the wash sale.".  A wash sale cannot occur unless you re-purchase the shares within 30 days.

Yes you do have to include the Wash sale on your tax return.  Wash Sales can be, and often are closed out in the same year.  The initial Wash Sale will support the adjusted basis of the re-purchased stock.

@elbee correctly stated that the number of shares in a Wash Sale will correlate. 

By example:  If you initially purchase 100 shares of XYZ and sell at a loss.  Then re-purchase 200 Shares of XYZ the Wash sale carryover applies to only the first 100 shares.

If you initially purchase 100 shares of XYZ and sell at a loss.  Then re-purchase 50 Shares of XYZ the Wash sale carryover applies to the  50 shares, you get credit for the loss on the original 50.

@otaclik

[jobobcowman]

Sorry to resurect this thread, but one last clarifying question.

If you sale and repurchase an options contract within 30 days and it generates a wash sale, but close all positions prior to the end of the year and do not repurchase that stock/option on the stock within 30 days, all wash sales have been closed out and any losses received can be applied against any gains...correct?

[DianeW777]

Yes, you are correct.  The key is whether any wash sales are still active and open on December 31st.  For this reason wash sales need to have individual entries for tracking purposes.

@jobobcowman