Wash sale across separate accounts - how to adjust

[TodS]

In reviewing my capital losses and purchases within +/- 30 days of that loss, I find one instance where my sale in my account (for a loss) constitutes a wash sale.  There were purchases in my spouses account for the same security (via a monthly reinvestment) within that 30 +/- day window.  As such the wash sale rules come into play.  Because this is across separate accounts, the FIis not responsible to report it, so it does not show up as a box 1g adjustment on my 1099 B.  Where in TT am I supposed to make this adjustment reporting that part of my loss is being disallowed? 

FWIW: In my case, the sold shares are non-covered lots such that the basis of the sold shares is not reported to the IRS.  That is, for the CG Schedule D data, I could pretty much insert any cost basis I chose with or without a wash sale adjustment.  The more generic case of a covered security sale would not allow that flexibility.  So TT and the IRS forms must have some way for the user to report that adjustment from the FI supplied 1099's that do not include the adjustment.     

[DianeW777]

Let's simplify the adjustment so that you are not taking a lot of time to identify the sales with the wash sale in it.  

It's clear you know the rules so my advice is to put in a sale with only a sales price at the same amount as the wash sale loss.  This will cancel out the wash sale loss for now and you can track it easily for 2024 when the wash sale no longer exists.  Simply add the loss it to your cost basis for the actual sale of the remaining shares.  Some wash sale details below.

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.

As long as you are tracking the wash sales and are not using them on the tax return when you are not allowed, then you can simply enter the same cost basis as the selling price. This will  reconcile your tax return with your Form 1099-B Proceeds which is what the IRS is comparing.

Be sure to keep good records so that you know when to add those losses for future 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 as in your situation.  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.

[TodS]

@DianeW777 Thanks for the reply.  Let me get more specific to make sure I am seeing this right.

8/31/23 Bought (by reinvestment) 98.245 shares in Account A

9/5/23 Sold 1500 shares from Account B for an apparent loss (face value loss; proceeds less original cost basis of those shares) of $1275 or $0.85/share loss.

As I see it, 98.245 x $0.85 = $83.51 of the loss would be disallowed and $1191.49 of the loss would be allowed.  The basis of the 98.245 shares in Account A get increased from their total purchase price by the $83.51.

Is that correct as you understand it?

From there, I am wondering about how in Windows desktop TurboTax I get that 83.51 wash sale adjustment entered without compromising the accuracy of the brokerage provided 1099-B form.   

[DianeW777]

Yes, you may calculate the actual wash sale based on the amount repurchased within the 60 day window (30 days before or 30 days after the sale). 

More or less stock bought than sold.  If the number of shares of substantially identical stock or securities you buy within 30 days before or after the sale is either more or less than the number of shares you sold, you must determine the particular shares to which the wash sale rules apply. You do this by matching the shares bought with an equal number of the shares sold. Match the shares bought in the same order that you bought them, beginning with the first shares bought. The shares or securities so matched are subject to the wash sale rules.

• IRS Publication 550 - page 85 (See the example.)

This may require a bit more review and calculation on your part based on the dates of purchase of the stock.

@TodS 

[TodS]

@DianeW777 Agreed

So how do I represent this adjustment in Windows Desktop TurboTax Deluxe without altering the 1099B representation from the brokerage?  Their 1099B is correct based on the information they have available to them.

Or where on the IRS Sched D, or 8949 do I represent this adjustment?

Ahhh.  Page 86 of P550 >> 

How to report. Report a wash sale transaction in Part I or Part II of Form 8949 with the appropriate box checked. Complete all columns. Enter “W” in column (f). Enter as a positive number in column (g) the amount of the loss not allowed. See the Instructions for Form 8949. 

And in TurboTax in a Forms view:  Capital Assets Sales Worksheet / Quick Entry Table -- "double click on any field in the table to QuickZoom to the associated Capital Gains (Loss) Adjustments Worksheet.  Close to the end of Part III is a spot to specify a disallowed Wash Sale adjustment.

[DianeW777]

Yes, the Capital Assets Sales Worksheet is a place you can make your wash sale adjustment.  You can also make a quick entry as described earlier:

• My advice is to put in a sale with only a sales price at the same amount as the wash sale loss (creates the same end result).

The IRS has many forms with a slight variance on the tax return which is normal in the area of stock sales.

@TodS