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I bought 100 shares of XYZ(January 2017) at $1. The stock then dropped to .50c over the next 12 months. I decided to average down and buy 50 more shares a year later on (January 2018) at .50c, totaling 150 shares. The stock price then moved up in March 2018 to .70c. I decided to reduce my holding to 100 shares, so I sold 50 shares at .70c.

Is that a wash sale?

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  • Wash sales only matter if you are trying to use the loss to offset another gain for taxation purposes.
    – zeta-band
    Aug 30, 2018 at 15:55

2 Answers 2

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No because the trades are more than 30 days apart. If the spring sell trade were within 30 days of the winter buy trade, it would be a wash sale.

From Wikipedia:

Under Section 1091, a wash sale occurs when a taxpayer sells or trades stock or securities at a loss, and within 30 days before or after the sale:

Buys substantially identical stock or securities, Acquires substantially identical stock or securities in a fully taxable trade, Acquires a contract or option to buy substantially identical stock or securities, or Acquires substantially identical stock for an individual retirement account (IRA). The "substantially identical stock" acquired in any of these ways is called the "replacement stock" for that original position.

The above is not tax advice, please consult your tax professional for advice if trading.

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    I realise it's the default, but it may be worth mentioning that you must be using FIFO (first-in, first-out) for this to be a wash sale (the $1 shares are sold at 70c for a loss). With LIFO, there wouldn't be a loss (bought at 50c; sold at 70c).
    – TripeHound
    Aug 29, 2018 at 7:13
  • IRS Pub 550: Broker holds stock: If you have left the stock certificates with your broker ... you will make an adequate identification if you Tell your broker or other agent the particular stock to be sold or transferred at the time of the sale or transfer, and Receive a written confirmation of this from your broker or other agent within a reasonable time. Stock identified this way is the stock sold or transferred even if stock certificates from a different lot are delivered to the broker or other agent.
    – Bob Baerker
    Aug 29, 2018 at 11:58
  • Single stock certificate: If you bought stock in different lots at different times and you hold a single stock certificate for this stock, you will make an adequate identification if you: Tell your broker or other agent the particular stock to be sold or transferred when you deliver the certificate to your broker or other agent, and Receive a written confirmation of this from your broker or other agent within a reasonable time. (or read what TripeHound wrote)
    – Bob Baerker
    Aug 29, 2018 at 11:59
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    Very probably > 30 days, but 2018 is a non-leap year and Jan. 31 and March 1 were both trading days, thus only 29 days apart.
    – dave_thompson_085
    Aug 29, 2018 at 19:31
  • Good catch @dave_thompson_085
    – Charles Fox
    Aug 31, 2018 at 1:04
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First in, first out (FIFO) is the default (oldest shares are sold first).

Last in, first out (LIFO) is the opposite. You sell your newest shares first.

If you use any method other than FIFO, you must tell your broker which shares you want sold. According to IRS Publication 550, the burden is on you to prove that you instructed your broker which shares to sell and that your broker followed your requests. If you can't prove that, you're treated as having sold your oldest shares first (FIFO).

If the shares purchased in January of 2018 were bought more than 30 days before the March sale then there is no wash sale. If that's the case then you could have designated that shares from the first purchase were sold (a loss) or shares from the second purchase were sold (a gain).

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    Can you flesh your answer out a little more? Which method results in a wash sale? Which method is most beneficial for the OP?
    – Ben Miller
    Aug 29, 2018 at 2:32

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