I buy 100 shares of ABC @ $50. I sell it in a week for $45. I buy it back in a week at $30. My understanding is that the adjusted basis for the last purchase was $35. Is that correct? If so, it seems the wash sale made sense, given the stock was trending lower significantly. Any help here appreciated.
The wash sale means that you can't deduct the realized $5 loss until your sell the replacement shares. So as noted, you adjust the cost basis of the replacement shares and indirectly claim the loss when they are sold.
Creating a wash sale makes sense if you think that owning the stock at $30 is a good idea.