When to add/adjust disallowed loss to the cost due to wash sale?

[Ianz]

The situation is that all sells are loss, here is one example: 

In broker account A:

1. 1/1/2020, buy 10 shares of XYZ at price $100,  cost $1000

2. 1/2/2020, sell 10 shares of XYZ at price $80, proceeds $800, loss $200. it is wash sale due to next purchase after 1 day.

In broker account B:

3. 1/3/2020, buy 30 shares of XYZ at price $50, cost $1500

4. 1/4/2020, sell 30 shares of XYZ at price $40, proceeds $1200, loss $300. 

5. no any more purchases or sells for stock XYZ in rest of year 2020 and year 2019, 2021 in all broker accounts

Is transaction #4 wash sale too as there is purchase 3 days ago(1/1/2020)? 

I had  $200 of wash sale on #2 and the adjusted loss is 0, and add $200 of disallowed wash sale amount to the cost of #3, that is $1500+$200=$1700, the final loss is $1200-$1700=-$500, is this correct? 

If this is not allowed, How do I report loss to IRS? 

[Mike9241]

yes #3 created a wash sale for #2 but only 10 shares not 30

so really the tax basis of the 10 shares purchased in trade #3 has a tax basis of $700 and the remaining 20 shares  have a tax basis of $1000

trade #4 results in a loss of $300 on those 10 shares with a cost basis of

$700 and a loss on the other 20 shares of $200. so you end up with $500 in losses.

your broker should be reflecting the wash sales on the 1099-B which includes adjusting the cost of the wash sale shares to include what you paid + the wash sale amount. 

note that for shares acquired that create a wash sale the holding period goes back to the date the original shares were bought (trade 1) 

[Ianz]

#1,2 and #3,4 are in different broker account, so I need to determine it by myself.  I am confusing if I can report a total of $500 loss in the tax year 2020.

[JohnB5677]

Here are how the transactions should look:

1. 1/1/2020, buy 10 shares of XYZ at price $100, cost $1000

2. 1/2/2020, sell 10 shares of XYZ at price $80, proceeds $800, loss $200. it is wash sale due to next purchase after 1 day.

3. 1/3/2020, buy 30 shares of XYZ at price $50, cost $1500

• 20 shares XYZ $50 = $1,000 basis
• 10 shares XYZ $50 = $500 + $200 (Wash sale) = $700 basis

4. 1/4/2020, sell 30 shares of XYZ at price $40 = total proceeds $1,200

• 20 shares $800 proceeds - $1,000 basis = $200 loss
• 10 shares $400 proceeds - $700 basis = $300 loss

[Ianz]

Thanks @JohnB5677  and @Mike9241 for your reply!

So the loss of $200 can be deducted in last tax year 2020, not defer to 2021, although the replacement shares are sold within 30 days too. and the loss of $300 in transaction #4 is not a wash-sale, so I can claim a total of $500 loss in the tax year 2020, are these correct? 

I thought I need to re-purchase 10 shares of the same stock in year 2021, and then add $200 to the cost of 2021 purchases, and claim the loss in tax year 2021, it seems this is not necessary, right?

[ReneeM7122 · Accepted solution]

No, you don't want to re-purchase shares of the same stock and add $200 to the cost basis in 2021.  You can deduct a total loss of $500 in 2020.

Here's a TurboTax video about buying and selling stocks.

@Ianz