Personal Finance & Money Stack Exchange is a question and answer site for people who want to be financially literate. It only takes a minute to sign up.
Sign up to join this community
I have read most of the posts on this subject and I think that I know the answer but I want to verify it:
I made $50 on purchase 1 and lost $150 on purchase 2 for a total loss of $100. Is this considered a wash sale? My thinking is NO since both sales were more than 30 days. Sorry if this is posted twice, my PC had some problems. Thanks for any help.
No, it would not be a wash sale, but it doesn't really matter. If it were a wash sale (meaning the sale was within 30 days of either or both buys), your total loss would be exactly the same.
Wash sales rules don't prevent sales - they just defer the tax benefit of the loss.
Foe example, if you has subsequently bought 200sh of xyz on 3/2/20 for $3.5 (or any price, really), then you would not be able to deduct the $100 as a capital loss - you'd have to defer that loss until you sold the 200sh that you bought on 3/2. Even then, if it all happens in the same tax year it doesn't make any difference.
A wash sale occurs when you acquire “substantially identical” stocks or securities within 30 days before or 30 days after realizing a loss. The key words here are "replacement securities". The IRS has no issue if you sell for a gain and buy back identical stocks or securities within the above time frame. The purpose of the wash sale rule is to prevent investors/traders from creating artificial losses in order to reduce taxation. For example:
1) 2/02/20 buy 100 shares @ $20
2) 3/10/20 buy 100 shares @ $14
3) 3/11/20 sell 100 shares @ $15
If FIFO is used, the first and third trades result in a $5 loss. The second trade creates the wash sale because they are considered replacement shares. Therefore the $5 loss must be deferred until the second purchase is sold.
In your example, there are is no wash sale because all shares have been disposed of. If your second purchase was within 30 days of the 3/01/20 sale date, there would still be no wash sale because no replacement shares were purchased (you have no ongoing open position).
