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I have a situation where I'm trying to avoid a wash sale and am trying to realize some losses by year end.

Here's the situation:

  • Jan 1st - purchase 100 shares of XYZ at $100 per share - $10,000
  • March 1st - purchase 100 shares of XYZ at $80 per share - $8,000
  • September 1st - purchase 100 shares of XYZ at $60 per share - $6,000
  • November 1st - purchase 100 shares of XYZ at $50 per share - $5,000

I currently have 400 shares of XYZ at an average cost basis of $72.5 per share. The current price of XYZ stock is $45/share

Using the FIFO method though, I thought I could now sell my "first" 100 shares for $45/share, resulting in a realized loss of $5,500, though I'm worried since I made another purchase less than 31 days ago this would trigger a wash sale?

My Questions

  1. Do I have stop trading XYZ for 31 days to not trigger a wash sale
  2. Using FIFO can I do what I'm planning on December 2nd, and realize the ~$5,500 loss?
  3. What happens if I sell 100 shares today? (Which lot would the sale apply to? The last 100 shares bought?...resulting in a 500 dollar loss?)
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A wash sale occurs if you buy shares in the 60 day window surrounding the date of a realized loss (30 days before or 30 days after). Since you bought shares on November 1st, any sale for a loss before December 2nd will create a wash sale.

For closed trades, brokers default to FIFO. The IRS allows you to designate the shares you want sold. This must be done with your broker who must provide written proof of such instructions.

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