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22

You are correct. She cannot claim the initial loss of $1,000 on her taxes, she can only report the $500 profit. However, the IRS does allow her to add the $1,000 loss to the basis cost of her replacement shares. e.g. Trader buys 100 shares at $100 / share. Trader sells 100 shares later that day at $90/share. Loss of $1,000 Trader buys 100 shares the next ...


11

It sounds like this is an entirely unsettled question, unfortunately. In the examples you provide, I think it is safe to say that none of those are 'substantially identical'; a small overlap or no overlap certainly should not be considered such by a reasonable interpretation of the rule. This article on Kitces goes into some detail on the topic. A few ...


8

Sure - the way the wash sale works is that your cost basis for the repurchased shares will be your original cost basis, so you can sell the repurchased shares, use the proceeds to buy a different stock, and recognize the loss.


7

The IRS has been particularly vague about the "substantially identical" investment part of the wash rule. Many brokers, Schwab for instance, say that only identical CUSIPs (exactly the same ETF) matter for the wash rule in their internal calculations, but warn that the IRS might consider two ETFs over the same index to be substantially identical. In your ...


6

From the IRS Section 1091. Loss from Wash Sales of Stock or Securities Section 1091(a) provides that in the case of any loss claimed to have been sustained from any sale or other disposition of shares of stock or securities where it appears that, within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such ...


6

If you are worried about wash sales within your Wealthfront portfolio, it appears that you should be safe. According to Wealthfront, their harvesting algorithm avoids wash sales: Wealthfront’s tax-loss harvesting algorithms manage your accounts to avoid wash sale issues within your Wealthfront investment portfolio. This includes both sale and purchase ...


6

Nobody knows for sure what "substantially identical" means because the IRS hasn't officially defined it. Until they do so, it would come down to the decision of an auditor or a tax court. The rule of thumb that I have always heard is if the funds track the same index, they are probably substantially identical. I think most people wouldn't consider any pair ...


6

Your wash sale example only has an impact if Day 3 and/or Day 4 are in January of the following year. If this all happened in June, there is no impact, you are right. If Day 3 or 4 are in January then the loss is disallowed for the prior tax year and is pushed to the next tax year or whatever tax year the open position is disposed of. A loss this year is ...


5

'Note that "to keep an investor from lowering their tax bill" is not an explanation'. Well, yes it is. In fact it is the only explanation. The rule plainly exists to prevent someone from realizing a loss when their economic situation remains unchanged before/after a sale. Now, you might say 'but I have suffered a loss, even if it is unrealized!' But, would ...


5

Yes. On December 10, you have a wash sale. As long as you don't buy the stock back for 30 days after that, the wash is of no consequence. In other words, you don't have a wash issue if you don't own the stock for 30 days.


5

In a comment on this answer you asked It's not clear to me why the ability to defer the gains would matter (since you never materially benefit until you actually sell) but the estate step up in basis is a great point! Could you describe a hypothetical exploitive scenario (utilizing a wash sale) in a little more detail? This sounds like you still have ...


4

No, time of day doesn't matter. Its the whole day, it doesn't matter if you sold in the morning or bought in the evening.


4

Disallowed losses due to the wash sale rule are added to the basis of the repurchased shares. In your example, on day two you paid $0.70 per share. Then the disallowed $0.30 loss from the previous day gets added to the basis, making your total basis $1.00 per share. When you sell at the end of the day for $1.00 per share, your net gain/loss is zero. ...


4

You are safe from considering it a wash sale. The two transactions are more than 61 days apart (December 31st 2017 to mid-March 2018); and the two funds are different. An S&P 500 fund is different than a Russel 3000 fund . The two funds are stock funds, but they are not based on the same index. I looked at the makeup of the Russell 3000 at barchart....


4

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 ...


4

First, you seem to have found quite a volatile stock! (Especially if all four transactions were the same day.) The wash sale rule applies to capital gains taxes but doesn't significantly affect you in this case. Because you repurchased the 31 shares of ABC (and then some) that you sold at a loss, that loss is not recorded as-is for federal tax purposes. ...


4

You are misunderstanding what constitutes a wash sale. In your example, the wash sale rules do not apply (as long as you don't buy the stock again for 30 days after the sale). Let's say that you bought your 100 shares of XYZ for $50 each. At some point in the future, the price drops to $40. You think that the price will bounce back and you want to ...


3

No. If you didn't specify LIFO on account or sell by specifying the shares you wish sold, then the brokers method applies. From Publication 551 Identifying stock or bonds sold. If you can adequately identify the shares of stock or the bonds you sold, their basis is the cost or other basis of the particular shares of stock or bonds. If you buy and ...


3

The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss, and within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so. http://www.investopedia.com/terms/w/washsalerule.asp Doesn't matter whether purchase or sale happened first, ...


3

Is this possible and will it have the intended effect? From the US tax perspective, it most definitely is and will. Is my plan not very similar to Wash Sale? Yes, except that wash sale rules apply for losses, not gains. In any case, since you're not a US tax resident, the US wash sale rules won't apply to you.


3

From Pub 550: More or less stock bought than sold. If the number of shares of substantially identical stock or securities you buy within 30 days before or after the sale is either more or less than the number of shares you sold, you must determine the particular shares to which the wash sale rules apply. You do this by matching the shares bought ...


3

Overall the question is one of a political nature. However, this component can have objective answers: "What behavior is trying to be prevented?" There are mechanisms by which capital gains can be deferred (1031 like-kind exchange, or simply holding a long position for years) or eliminated by the estate step up in basis. With these available, ...


3

The way the wash sale works is your loss is added to your cost basis of the buy. So suppose your original cost basis is $10,000. You then sell the stock for $9,000 which accounts for your $1,000 loss. You then buy the stock again, say for $8,500, and sell it for $9,000. Since your loss of $1,000 is added to your cost basis, you actually still have a net ...


3

It's been documented (although, in my opinion, the linked question is awful) that a loss in a taxable acct can be "washed" by a purchase in a tax favored acct. The answer to your question is yes, whatever the loss from shares sold is offset by up to the same number of shares purchased in the tax favored acct. In practice, it would take a very diligent ...


3

A wash sale occurs when you incur a loss and you buy a “substantially identical” stock, option or or security within 30 days before or after the loss date. If done, the loss is added to the cost basis of the substantially identical investment you purchased and gets carried forward until the position is fully liquidated for more than 30 days. Full ...


3

Wash sale rule is for stocks sold at a loss, so in the scenario you describe there is no issue with donating and re-buying. If the value had dropped in your example it would make more sense to sell, take advantage of the loss, and make a cash donation for additional tax benefit (assuming already itemizing of course). They would have to wait to re-buy in ...


3

The wash sale rules exist to discourage people from selling a security solely for the tax loss when they fully intended to continue holding that security.


3

If all of your transactions are in the same tax year there is zero difference in outcome. Basic accounting with no wash sale yields a net $1 gain: Transaction 1 Transaction 2 Buy $10 Buy $4 Sell $5 Sell $10 Result -$5 Result +$6 Net +$1 Now consider wash sale, with a disallowed and appropriate cost basis ...


3

With the Wash Sale rule, if you sell a security at a loss and buy the same or “substantially identical” stock or security within 30 calendar days before or after the sale, the loss is disallowed for current income tax purposes. If you violate the wash-sale rule, you can’t claim your loss and your loss will be added to the cost basis of the replacement ...


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