Does wash-sale rule apply to my case?

Question

I put like $14,000 in a Fidelity account, and $5,000 in a TD ameritrade account.I used all the money in 2 accounts to buy shares of UGL Etf on 8-18-20 (this Proshares leveraged ETF tracks the gold price X 2), because the gold price had soared. However, 8-19-20, gold price started to fall. And, I sold all the shares on 8-25-20, incurred a loss of $1600 ($1200 + $400). The Buy and Sell transactions at 2 accounts happened pretty much at the same time, on the same dates. I haven't bought the UGL shares after that. My question is, Is the $1600 loss subject to wash-sale rule?

My Fidelity and TD Ameritrade Gain/Loss pages don't show them as Wash-sales. But, an Internet article says: " When an investor holds several different investment accounts, wash-sale rules apply to the Investor, rather than a specific account. The IRS requires that brokers track and report any sales of the same CUSIP number in the same non-qualified account. However, investors are responsible for tracking and reporting any sales that occur in all other accounts that they control, including any accounts belonging to their spouse". ( I don't remember what website this article is on).

From what I know, the rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss; and within 30 days before or after this sale, buys a "substantially identical" stock or securities, or acquires a contract or option to do so. I understand "Buying the same stock within 30 days after the sale", but "30 days before the sale" doesn't make sense to me. I have searched on the Web, but couldn't find examples for the "30 days before the sale" circumstance.

Answer 1

Here is the timeline in your question:

• You on 18 August invested $19,000 in fund X via 2 different brokers. Ending up with Y shares of the fund.
• You on 19 August sold all Y shares of the at a loss of $1,600.

You no longer own any shares of that fund. It has been longer than thirty days since you closed that position, without purchasing any shares of fund X. Therefore you you have meet the after test.

Your scenario also passes the before test because the you don't have a purchase that was done to try and lock in any losses so you can deduct the loses on your taxes. You have completely close the position.

The before test is there because if you were trying to harvest tax losses, and only the after test existed you would purchase the new shares minutes before selling the old ones. They push the test to 30 days so that it is harder to game the system.

Answer 2

You are correct:

• If you hold have more than one brokerage account, the wash sale rule still applies.

• The wash sale rule includes the 30 days before and the 30 days after realizing a capital loss.

@mhoran_psprep explained why you do not have a wash sale violation.

For clarity, understand that there is no consequence to incurring wash sales all year long as long as the trades in question are closed by the end of the year (note that when you close a short sale at a loss, tax law treats the transaction as occurring on the settlement date so make sure that your transaction date leaves enough time for settlement within the same calendar year). Wash sales will result in cost basis adjustments (an accounting issue) but it has no effect on your taxes.

Where this becomes a problem is the end of the year. If you have an open position at the end of the year that has an attached wash sale loss and the position is carried into the new year, then the loss must be deferred to the subsequent tax year. To avoid this, close wash sale positions before the end of the year and do not trade this stock again for 31 days.

Here's a web site that provides a lot of wash sale examples.