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wash sale.

Hi my question is this. i am doing day trading. I am doing 20-30 trades per day with same stock. Lets say i made 10 trades one day with apple  stock. Out of the 10 trades i made profit on first 7 trade for $500. On my 8th trade i have a loss of 50. then i buy the same stock (which trigger a wash sale)  and i sell it for a gain of $100 on same day. Then i didn't do any more trade for the day. So in this case what is my net gain for the day that will be taxed?. And what if i sell the my 8th trade for a loss of $100 what will be my net gain for the day that will be taxed.? Please help. 

3 Replies

wash sale.

You would be taxed on any cumulative gains from your sells and would not be able to deduct any loss from those gains. If all are short term, your profit is taxed at your marginal tax. 

wash sale.

your first trade of the day is a buy of the identical security on which you had a loss on  a trade later that day, happening with +/- thirty days (assuming no earlier trades in the last thirty days).

The other trades don't matter.


adjusting of shares to account for shares with a wash sale loss starts with the earliest available shares (first trade in your example)

The earliest trade (first trade)  will have the loss added to its basis.

if you have more wash  losses then the rules step through your subsequent shares (first trade shares not yet adjusted, if any, second trade, third trade etc.

Fortunately for you, your broker is required to track all this for you and show it on your year-end trading detail report. 



wash sale.

note some things about wash sales (WS). when you have a WS the loss is not allowed. the loss gets added to the tax basis of same security that created the WS.  also, the holding period gets tacked on to the security that created the WS. that loss only gets recognized when you dispose of the security either at a gain taking into account the WS loss adjustment or at a loss and don't reestablish the position for the next 30 days.  things can get even more complicated if you have an IRA.  In 2008, the IRS issued "Revenue Ruling 2008-5," in which it addressed the question of whether the wash-sale rules apply to IRAs. In the ruling, the IRS explained that when shares are sold in a non-retirement account and substantially identical shares are purchased in an IRA within 30 days, the investor cannot claim tax losses for the sale, and the basis in the individual's IRA is not increased (this means the loss will never be recognized for income tax purpioses). 



traders can avoid the wash sale rule by making the mark-to-market election under IRC 475(f).  if your do 20-30 trades a day (over 1000 per year) you probably would qualify to make the election. if this piques your interest consult a tax pro.  it's too late to do it for 2023.  

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