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Early last year I incurred some wash sales. All of the securities involved in those transactions, however, were liquidated long (more than 30 days) before the end of the year. My assumption was that since those wash sales had already been accounted for --by being applied to the cost basis of positions that were then permanently closed within the same year--, that I would not have to deal with anything related to wash sale rules come tax time.

However, my 1099-B came with box 1g (Wash Sale Loss Disallowed) filled with a figure. What does this figure mean and what implications does it have on my taxes for that year or the next?

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You had a wash sale and a disallowed loss related to that specific sale. That disallowed loss is added to the basis of the replacement shares. Since you've liquidated your position - this doesn't affect your actual taxes, just the rows on which it is being reported in the forms.

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  • Why do I now get special instructions that I have to mail Form 8453 with a copy of my 1099-B to the IRS because of this particular adjustment? The IRS is making something that has no practical effect on the actual taxes, incredibly inconvenient to deal with.
    – AxiomaticNexus
    Feb 21 at 1:08
  • Now taking a close look at my generated Schedule D, it looks like it DOES affect the actual taxes. My capital losses were reduced my the amount in box 1g. It looks like I am expected to apply that amount to the cost basis of a future year's sale or something. I do not understand why this is happening; I do not have any open positions of the security in question; there won't be a future sale.
    – AxiomaticNexus
    Feb 21 at 1:33
  • Did you or the broker adjust the cost basis of the replacement shares?
    – littleadv
    Feb 21 at 2:36
  • I did not. How do I know that my broker did?
    – AxiomaticNexus
    Feb 21 at 2:44
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    Check the trade confirmation and compare the amounts of the actual trade to what's on 1099
    – littleadv
    Feb 21 at 2:54

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