I am new to trading and I do not understand this.

I bought 31 stocks of ABC for $7,658.85 and then sold 31 for $6,346.56.

On the same day I bought 35 stocks of ABC for $7,160.00 and then sold for $8,289.94.

In my account I see Disallowed Loss: $1,312.29 and what sale activity has adjusted this cost

What does this all mean? Does it mean that I lost $1,312.29 forever? Or will they return it to me at some point?

Thanks for your answers.


First, you seem to have found quite a volatile stock! (Especially if all four transactions were the same day.)

The wash sale rule applies to capital gains taxes but doesn't significantly affect you in this case. Because you repurchased the 31 shares of ABC (and then some) that you sold at a loss, that loss is not recorded as-is for federal tax purposes. Rather, the amount of the loss is added to the basis (cost for tax purposes) of the repurchased shares. (This basis adjustment should also be reflected in the 1099 from your broker. It's not clear whether you're looking at a final 1099 showing trades from a previous year or at a real-time "tax report" that tries to anticipate what will be on this year's 1099.)

The basis adjustment has the effect of reducing your subsequent gain, and the net effect in your case is as if you had recorded the loss normally. The point is that you finally get the tax benefit of the original loss when you sell the repurchased shares (as you have done).

Taxed gain/loss on first purchase and sale of 31 shares: 0.00

Taxed gain/loss on second purchase and sale of 35 shares: Sales price - Adjusted basis = 8,289.94 - (7,160.00 + 1,312.29) = -182.35

If you are filing US taxes, see the instructions for Schedule D regarding wash sales.


It means you can't claim a tax deduction for the initial $1,312.29 loss after you sold for $6346.

On the other hand the cost basis for your 35 shares will be deemed to be $1,312.29 higher than the $7,160 you actually paid.

So when the dust settles, your final sale will count as as realizing a loss of $182.35 for tax purposes.

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