Please see the example below illustrating a scenario where I buy replacement shares before selling the entire position.

My questions are:

  • If I don't buy replacement stock for 30 days after May 8th (Step 5 below), would the disallowed loss be lost forever?
  • What if I buy 200 shares of XYZ after 30 days, say on June 15th, 2020. Can the disallowed loss be used to adjust the new cost basis?


  1. I bought 200 shares of XYZ @ $45 on July 1st, 2019
  2. I bought another 400 shares of XYZ @ $25 on April 15th, 2020
  3. I sold all 600 shares of XYZ @ $30 on April 25th, 2020
  4. I again bought 300 shares of XYZ @ $32 on May 1st, 2020
  5. I sold all 300 shares of XYZ @ $35 on May 8th, 2020

The only time that a loss is lost forever is when the realized loss occurs in a non-retirement account and the replacement shares are purchased in an IRA account. That's because the cost basis of the IRA shares cannot be increased. Since you made no mention of a using two account types, this isn't applicable.

In your example, trade (3) liquidates all shares purchased on 7/01/19 and 4/5/20 so there is no wash sale. Some will argue that trade (2) creates a wash sale because the shares were purchased within 30 days of the loss realized on 4/25/20 but that's not the case because they weren't replacement shares (there's no ongoing open position).

Trade (4) creates the wash sale violation because replacement shares were bought within 30 days of the realized loss and the cost basis must be adjusted. Once sold on 5/08/20, there's no more issue since there are no open positions.

Regardless of what the prices were in any of these trades, anything bought 31 days after trade (5) would have no wash sale possibility since the purchase date was outside of the wash sale violation window.

Note that wash sale violations are not an issue if all involved positions are closed in the current calendar year. If replacement shares have an adjusted cost basis due to a wash sale violation and these replacement shares are not sold in the current year then the loss is deferred to at least the next calendar year.

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