Wash sales of four years ago. Can I use them as extra added cost for stock transactions this year?

[dansd1]

I had a lot of wash sales occurred four years ago and I had never knowingly used them. I use TDAmeritrade. After electronically imported all the stock transaction data from TDAmeritrade every year, TurboTax automatically generated Form 8949. On Form 8949, there are details and summaries of disallowed wash sale loss on column (g).  Please let me refer them as Disallowed Wash Sale Loss here so I can better express myself. 

To be exact, I had wash sale loss in year 2019, 2020, 2021, 2022, and 2023. If I do my tax return for year 2023 (which is tax report due by 04/15/2024, I will refer this tax return as Tax2023), can I use the Disallowed Wash Sale Loss incurred in year 2019 for Tax2023 please? If yes, can I add one extra transaction using the total of Disallowed Wash Sale Loss of 2019 as cost and using 0$ proceeds and claiming short term loss (to be safe) ?

If no, will those Disallowed Wash Sale Loss of 2019 be useless for me forever?

Experts, Please kindly help! I read a lot online here and there, but all readings point me to bigger headache. Yesterday I ran into a posting here, and I felt like this is a far much better place to learn on that. Please help! Stock trading ruined my life! Wash sale headache basically paralyzed me, made me unproductive on everything.  I had used a well known professional tax service (chain store nation wide) long time ago once, but they manually input all transactions by hand and did not even mention anything about wash sale to me. After that, I do not trust those so called tax service any more.  Plus, most recent years, transaction numbers are huge and it is almost impossible to handle the wash sales manually.

I greatly appreciate your help! 

[JulieS]

No, not exactly

If your loss was disallowed because of the wash sale rules, add the disallowed loss to the basis of the new stock or securities. Your holding period for the new stock or securities includes the holding period of the stock or securities sold.

This adjustment postpones the loss deduction until the disposition of the new stock or securities. 

For example: You buy 100 shares of ABC stock for $1,000. You sell these shares for $750 and within 30 days from the sale you buy 100 shares of the same stock for $800.

Because you bought substantially identical stock, you cannot deduct your loss of $250 on the first sale. However, you add the disallowed loss of $250 to the cost of the new stock, $800, to obtain your basis in the new stock, which is $1,050. 

Please note, your broker may be making these adjustments on your behalf automatically, so you may not have lost any basis in wash sales. Contact them to get additional information about your account. 

[dansd1]

Thank you for your repy!

But my question is, can I use the wash sale loss incurred in year 2019, in tax return 2023 please? I had chances to use those disallowed wash sale loss of year 2019 in my tax return 2020 and tax return 2021, but I did not use them at all because I do not understand how to use them. Thank you!

[fanfare]

Your "extra" deduction is not correct and would cause a problem if the IRS reviews your tax return.

wash sale losses disallowed are recovered when you dispose of the triggering shares that caused the wash sale.

If you reported your consolidated 1099-B as given in all those years

you got your deduction unless you are still holding the triggering shares in your account.

IRS requires the broker to track all this for you.

@dansd1 

[Mike9241]

TD should have added any disallowed loss due to a wash sale to the tax basis of the transaction with the substantially identical securities (SIS) that caused the wash. sale. Then when you sold them without creating another wash sale the loss would have been included and you would thus have deducted the loss on your return. Repeated wash sales would result in repeatedly adding the prior disallowed loss and current disallowed loss to the tax basis of the SIS 

example sell for 1000 cost is 1100 wash sale on purchase of SIS for 1200 creates a tax basis of 1300 (1200 paid + 100 wash sale)  now you sell this and create a wash sale

tax basis 1300 sell for 1000 and buy SIS for 1500 your tax basis is now 1800 (1500 paid 100 from previous wash sale + 200 from purchase cost of 1200 and sale for 1000.

sell the security for 1800 or more there is no longer a wash sale. your sales price 1800 vs actual purchase cost of 1500 would, except for the wash sales, result in a $300 gain but because there is the 300 wash sale losses included in your tax basis there is no gain and you recognized the previous losses. 300 in wah saale losses is added to the tax cost is 

This is standard reporting required by IRS rules. So make sure you are not doubling up by taking a loss already taken in a previous year or included in allowable losses for this year.

[dansd1]

Thank you @fanfare  !

Those disallowed wash sale loss were in year 2019. During a few month period of time in year year 2021, I did not hold any stock. That means, I disposed of all stocks in year 2021 or before. So, If I use the disallowed wash sale loss incurred in year 2019, I should be able to use all the wash sale loss incurred in year 2019 as extra cost basis on my 2021 return. Is that correct please?

[dansd1]

@Mike9241  Thank you for your reply! That is one of my concerns. 

--- "So make sure you are not doubling up by taking a loss already taken in a previous year or included in allowable losses for this year."

[fanfare]

IRS requires the broker to track all this for you.

There's nothing for you to do unless you ttrade the same security with two brokers,

or in two accounts at your one broker, in the same time frame.

[dansd1]

I posted a few raws of real numbers here but the posts are gone everytime after I posted. I am not sure why.

I will try one more time after this message.

Thanks.

[dansd1]

It looks like everytime I post some umbers, this web deleted my post shortly after.

[dansd1]

I spent more more than an hour talking to TDAmeritrade tax experts, asking them if the disallowed W numbers on the 1099B were automatically counted as extra cost toward the following transactions for the same triggering stock. They did not know.  They sent me theh form 1099B, and they did not know what that means.

[fanfare]

If you are a Preferred Client of TD, they will wade through your documents to answer your question, within reason.

Otherwise you are on your own to examine your statements.

If there are errors you have to report them right away, not four years later.

IRS requires the broker to track all this for you.

@dansd1 

[fanfare]

the 1099-B does not show the adjustment amount on a triggering transaction nor any indication that it happened,'the only way to know is

to compare the cost basis reported with the cost of your trade on the day you executed it.

It is not considered a transaction with adjustment for purposes of Form 8949 Col (f,g)

@dansd1 

[dansd1]

Hi @fanfare  @Mike9241  @JulieS ,

I greatly appreciate all your replies! The problem bothered me for years and made me very depressed. I read all kinds of investment forums regarding this topic. But the more I read, the more confusing it is. 

I chatted online with TDAmeritrade again today. Their answers confirmed what you all said. They do carry over the disallowed wash sale loss to later transactions as extra cost basis for the triggering stock. 

Thank you all so much! I'd very much like to show my appreciations for your kindness. Please kindly send me a private message with your email, then I will show my appreciation. Thank you all again!