Wash Sale

[michasiegel91]

Pretty often on 1099-Consolidated I see a wash sale reported. However it isn't added back in the calculation of the realized gain. Is this because the wash sale was added directly to the cost or is it a mistake by the brokerage firm?

[Critter-3]

 Is this because the wash sale was added directly to the cost or is it a mistake by the brokerage firm?

Normally yes ... ask your broker for details. 

[Anonymous]

different brokers might present info differently.  

the usual way a broker would handle a sale that creates a wash sale loss is to report the sales price, cost and wash sale amount which would reduce the loss. 

there is also a situation where multiple lots are sold at one time. one lot results in a wash sale the others do not.  there is an overall gain on  sale so the wash sale amount will increase the realized gain

example lot A sales price 3900 cost 3800 is a wash sales so wash sale loss amount 100 resulting in no realized loss

lot b sales price 3900 cost sales price 3600 realized gain 200

broker reports sales price 7800 cost 7400 wash sale 100 realized gain 100 

generally the wash sale loss is added to the cost basis of the replacement securities 

we can't see what you're looking at so can't say if there's an issue with broker reporting

however, in the many years since loss sale reporting has been required every broker statement I've seen showed the following when there was a wash sale

sales price                     x

cost                                 y

wash sale amount        z As a positive number

realized gain or loss x-y+z

if you think the broker is misreporting you'll have to talk to them

for TT it shouldn't matter if in the 1099B worksheet sales price, cost and wash sale amount as a positive number are entered.  TT calculates the gain from these numbers.

note that many brokers report accrued market discount (line 1f on 1099b) which shows up on line 8a in TT

in the same column as wash sales (line 1g on 1099b).  how do you know which it is!  well on my statements sales are reported on 2 lines. if there is an amount for 1f or 1g 1f is on the first line and 1g is on the second line 

[michasiegel91]

Thanks, what I mean though is that sometimes they report it in the following way:

Proceeds:        100

Cost:                 50

Wash Sale:       10

Realized Gain: 50

It looks like it's not taking the wash sale into consideration, but I was wondering if it's included in the cost basis already.

[Critter-3]

A wash sale adjustment on a GAIN ???  Call the broker and ask them to explain their reporting methods or look at the instruction booklet that comes with the 1099-B or check online.

[Anonymous]

what you are showing does not make sense.   there is a gain and if there is a gain there can't be a wash sale.

wash sales only occur when there's a loss on a sale and there is a repurchase within the wash sale window.

example

sale   $100  (say 200 shares)

actual cost      $120 ($60 for every 100 shares)

actual (loss) ($20)

wash sale 100 shares repurchased within the wash sale period

was sale loss disallowed $10

realized loss ($10)

talk to the broker 

[fanfare]

the disallowed loss on a wash sale is added to the basis of some other identical shares.

IRS Pub 550 says to use the earliest acquired that are not already adjusted previously.

I see that Vanguard brokerage does not follow this rule, but uses a different rule.

I asked them to explain, I'm still waiting for an answer.

[fanfare]

Just got off the phone with Vanguard Cost Basis Dept.

They explained to me that I have been confused by Pub 550 and misinterpreting what it says.

Pub 550 says:

"If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities".  That would be, i.e.,  the purchased shares that triggered the wash sale rule.

This is exactly what Vanguard is doing.

Note: the disallowed loss can be less than the loss realized.

[michasiegel91]

Here is an actual example of what I mean on a Morgan Stanley 1099-Consolidated (But I've seen it several other times):

Proceeds:                        $80,423.32

Cost:                                 $78,368.62

Wash Sale Disallowed: $4.22 

Gain:                                 $2,054.70

Wash Sale Disallowed should be added back to the basis and the gain would be $2,058.92, but it looks like they already calculated the wash sale disallowed amount directly in the basis and the 4.22 is there for info purposes only. 

[michasiegel91]

Nevermind, I realize I was looking at the summary as opposed to the individual transaction, thank you.