It depends. 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. 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. Review the following information to see if you need to make any adjustments to cost basis and if a wash sale still exists for you.
It's up to you to know when you no longer have to consider the wash sale rule.
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.
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