Wash sale disallowed

[kamal444]

Hi,

I am doing taxes based on the stock selling listed on 1099-B.

My 1099-B has lot of data where cost basis is not reported to IRS. 1g in 1099-B is 0.

However, in the supplemental information I could find all the data for RSU and ESPP.

I have sold some RSU where the column mentions "Wash sale disallowed" with value 213.51.

In TT, I imported all the data and entered 0 in 1e box and checking box Cost basis is missing or inaccurate.

Next page it mentions me to adjust the cost basis which I did using the information provided in the supplemental form. However, there was nothing that I entered for Wash sale. Is there anything that I need to adjust manually or the Wash sale data was captured in the adjusted cost basis on supplemental form.

Thanks.

[DianeW777]

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. 

[kamal444]

Fidelity informed that all the wash sale is accounted in the cost basis calculation.

So, I am assuming that just need to add Adjusted cost basis in TT and nothing specific to wash sales.

[GeorgeM777]

Yes, that's right.  If the disallowed loss from the wash sale was added back to your subsequent purchase of the stock, then you can enter your cost basis as it appears on your 1099-B, and then make the adjustment to cost basis to account for the fact that the disallowed loss was added back to your cost basis.  

Keep your 1099-B and the Supplement because both documents support your entries on your tax return. 

@kamal444 

[Mike9241]

for those replacement shares that caused the wash sale, the broker/Fidelity has already added in the disallowed loss and included it in the 1099-B report if those shares were sold . so there should be nothing to adjust. 

@kamal444 

[alshi]

Can I sale those share in the same year and benefit from the higher/adjusted cost base?
For example,
(1) I sell stock A for a $100 loss.
(2) A week after, I buy stock A and (3) immediately sell it at the same price I bought it. Because of the adjusted cost base, the second sale has a $100 loss.
(4) Then I sell stock B at gained 100$ on.
Overall the net gain/loss is $0.
Can all this happen in the same year?

[Mike9241]

yes provided you don't buy stock A for 30 days after the the previous sale.  this includes not only taxable accounts but if you have a retirement account, like an IRA, that 30 days applies to them also. that 30 days includes the following year.  so a sale at a loss in late December 2024 and a purchase in early January 2025. will trigger a wash sale. 

[alshi]

What do you mean by "previous sale"?
And do the number of stocks matter?

[someanswer]

For Fidelity 2024 Supplemental Information - I don't see the basis (field Z) adjusted for the wash sale.  I see a field for Wash Sale Disallowed.     Are you adjusting Field Z for the Wash Sale Disallowed field?

The difference between the Ordinary Income Reported (y) and Adjusted Basis field (z) that I show,  do NOT align with the amount in the Wash Sale Disallowed field (all refer to Supplemental Info and not base 1099-B).

[JohnB5677]

Yes, the wash sale would affect the basis which may be in field (Z).

• However, this will not occur until you sell the last batch of stock after 30 days (That means on the 31st day)
• If it is sold after that date you should see that the basis is adjusted up to account for the previous losses.
• I suggest you keep track in the event it does not happen.
• There is an option to change the basis included in the TurboTax software.