Here's the scenario:
I have multiple wash sales with the same company. Let's use Apple as an example where I'm day-trading in and out of Apple. The price continues dropping and I keep buying back at lower prices. Now, I understand that the deferred loss gets added to the cost basis of each subsequent sale until I finally sell the wash sale lot(s) and do not buy them back for the 31 day-period.
So my questions/concerns about these lots are:
(1) If I own 500 shares of Apple, but 400 are being held long-term and I am trading 100 of those shares (causing the wash sales) short term, to break the chain of the wash sale before year's end, do I just need to sell the 100 shares? Or do I need to completely exit all of my Apple stock (assuming the other 400 shares were NOT wash sale trades)? It would be a shame to have to sell all 500 shares, especially since 400 were not sold and re-bought again and were purchased at a very low price.
(2) My broker told me that most of my wash sales have already been reversed for this year. Does that mean there is no deferred loss to worry about? And, it is safe to re-buy those stocks and trade them as non-wash trades?
(3) If you have a gain, then it's not a wash sale... does that mean I could make 20 wash-sale trades at losses and the last trade becomes a gain so it wipes out the wash sale? (I figure that the increased cost basis could eventually become a loss, even if I made a gain, because if a stock trade began at $20/share and by the time my last wash trade was at $15/share - I bought the last trade at $14/share and made a dollar profit - but it was still less than $20, so it still might be a loss?)
(4) I saw a couple of videos online and read a couple of blog posts where someone had disallowed losses (I assume that means deferred losses carried to the following year) that caused huge taxable gains for the current year, even though he lost money. Is this possible? Should I make sure my wash-sale lots are closed out by year's end?
Thanks for all the help!