When I upload Form 8949 transactions using TaxAct it rounds the proceeds/basis for each individual transaction to the nearest dollar. In other words if I make one transaction buying a stock for 0.51 and selling it for 0.49, and another buying for 0.51 and selling for 0.53, then TaxAct handles it as:
| Proceeds | Basis | Gain/Loss | |
|---|---|---|---|
| Transaction 1 | Round(.49)=0 | Round(.51)=1 | |
| Transaction 2 | Round(.53)=1 | Round(.51)=1 | |
| Total | 1 | 2 | -1 |
Rather than
| Proceeds | Basis | Gain/Loss | |
|---|---|---|---|
| Transaction 1 | .49 | .51 | |
| Transaction 2 | .53 | .51 | |
| Total | Round(1.02)=1 | Round(1.02)=1 | 0 |
This is easily exploitable. I can just find a stock trading slightly over $X.50, buy it and sell after it moves a bit. When it moves up I claim a gain of zero and when it moves down I claim a loss of 1. If I do this a million times then on average the real gains and losses will approximately cancel out and I end up with a ~500k tax loss with ~0 real loss (maybe slightly more than 0 if I have to cross a penny wide bid/ask spread, but at any rate a real loss much smaller than the tax savings from a 500k paper loss).
Presumably I didn’t invent a tax glitch, but I am wondering if I'm entering my transactions incorrectly, or TaxAct is handling them incorrectly or something else?
