If I sold some stock by mistake and immediately bought it back, is that sale still subject to capital gain tax in USA?

Question

Today I wanted to buy a few shares of Apple (AAPL), let's say 10 shares.

When I handled the UI, there was the "By number of shares" and "By dollar amount" and then "Market" and "Limit" price, and I clicked this and that, and it didn't accept the order (might have put in 1000 to mean $1000 but the label was "Number of Shares").

So I corrected some mistake and it allowed it to go through, but when it completed, I saw it was a "Sell" order. I am not sure if I clicked on the wrong place by mistake or if I tapped the Tab or space button by mistake. Mistakes happen.

So immediately, I bought 20 shares (to buy back the 10 shares and buy the 10 shares I originally wanted to buy), to correct the mistake. (Update to clarify: I owned more than 10 shares of Apple before I made the mistake and those shares were at a profit). This happened in my 401k account, so I think that sale was not subject to capital gain tax. But what if it happened in my individual account? Then that sale will be subject to capital gain tax for this current year? Is there a way to claim it was a mistake and within 2 minutes, I bought it back, or by some other method, it won't be subject to capital gain tax?

P.S. Update 2021 Apr 14: I just thought of something: since the IRS really would not care what minute and second we bought and sold the stock at, as long as it is the same day (and it was a mistake, really), so could we consider it to be this: (1) we bought the 20 shares of Apple, and (2) sold 10 shares immediately either gaining $0.01 or losing $0.01 or $0.00, so we have close to $0 tax consequence for those 10 shares. And the other 10 shares, it was then just considered to be new investment. Then in this case, it is as if the mistake didn't happen.

Answer 1

The only way this could work is if you convince your broker that there was a malfunction in their site/app and they agree to adjust their records as if you had not sold the stock. If you have a good case, they might be more likely to agree to this since the trade was immediately reversed, so what you're asking for wouldn't cost them much (compared to someone who's claiming that a malfunction led to an outright loss and is seeking reimbursement for that loss).

Otherwise, if you made an unintended trade by your own mistake in a taxable account, your 1099-B will show that trade and you will be stuck with the tax consequences (in this case, a taxable gain -- there is no "wash sale" gain exclusion). You'd just have to look at the bright side, that the shares you repurchased have a higher basis now and you will owe less tax in the future.

Answer 2

It depends. If the 10 shares you sold were sold at a loss, then buying back those 10 shares immediately after, results in a wash sale, in which case there is no tax consequence. If the 10 shares you sold were sold at a profit, then you will owe capital gains taxes on those profits when you file your taxes.

Answer 3

Based on your comments, let's be clear about what happened:

1. When you accidentally sold the 10 shares by mistake, you sold them short.
2. When you subsequently bought 20 shares, this is really two trades:
   a. A cover: you covered your short position of 10 shares, and...
   b. A buy: you went long 10 shares.</br/>

In a short position, you make money when the price goes down. In that moment between your sort sale and cover, if the price of AAPL went down, then you made money. If so, you'll pay ordinary income tax rates (as nanoman says below) because you bought and sold within a year. If you hold for a year or more, you pay a 20% capital gains tax.

If AAPL went up, you lost money, and may be able to take a tax deduction.

This assumes U.S.A. law.

Answer 4

this makes no sense to me. Why would you have to pay any kind of tax on it unless you actually take a disbursement??? I trade my IRA and trade all kinds of stocks, but as long as it all stays in the investment account and not in your bank or your pocket, you shouldn't have to pay any taxes. You can buy and sell shares within your account all you want. When you sell shares, the money doesn't go into your pocket, it goes basically into just another position which some people call "cash" but it's not cash, it's probably some type of bonds that are highly liquid and stable and pretty much hold value just like cash. at least that's my understanding. You only pay taxes when you cash out (as in actually withdraw cash from the account)