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Wash sale - True/false


Gopinath
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Hi All,

 

I bought 500 stocks of company A at $15/share on May 5 & 300 stocks at $15/share on may 6. I sold all of them on May 26 at $13/share. I took a loss of about $1600 on the whole. My brokerage statement says this as wash sale & disallowed loss. I disagree with them. Is this true? Any help would be much appreciated.

 

Thanks,

Gopi

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Oh, sorry here's the transaction list. These were the entire transaction in this particular security in 2010.

 

Date        Action      Price    Number of shares

4/27         buy         15       100

4/27         buy         15       100

5/5           buy         15       400

5/6           buy         15       200

5/6           buy         15       200

5/25         Sale         14       500

5/25         Sale         14       300

 

Loss of around $800. Is this considered a wash sale?

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No

 

The Wash Sale Rule

Top page in our explanation of the wash sale rule.

 

The wash sale rule prevents you from claiming a loss on a sale of stock if you buy replacement stock within the 30 days before or after the sale. That sounds simple enough — but there are so many questions that arise in connection with the wash sale rule that we have all the articles listed below dealing with the subject. The first article, Wash Sales 101, provides the essentials and will also give you an idea what kind of details you'll find in the other articles.

 

http://www.fairmark.com/capgain/wash/index.htm

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Oh, sorry here's the transaction list. These were the entire transaction in this particular security in 2010.

 

Date        Action      Price    Number of shares

4/27         buy         15       100

4/27         buy         15       100

5/5           buy         15       400

5/6           buy         15       200

5/6           buy         15       200

5/25         Sale         14       500

5/25         Sale         14       300

 

Loss of around $800. Is this considered a wash sale?

 

Did you trade a related security such as an option on the same stock?

 

If not, this could be a screwup related to the new FIFO default setting by your broker related to the new IRS regulations for determining S/T, L/T losses or gains.

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Did you own any of this stock before you purchased on 4/27? 

 

If you buy 30 days before a sale as "replacement stock", that's also a wash.

 

For instance:  I own 10,000 shares of XYZ @$3.00 i bought 9 months ago

 

I then buy 10,000 shares of XYZ at 1.50 and then sell 10,000 shares of XYZ less than 30 days later. 

 

That's a wash. 

 

 

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No trades like options/futures on the same underlying security. I see several like this in my statement. I talked to the customer care, they say that this is legitimate wash sale & disallowed loss. The way they put it "Since I bought in two/more lots with in 30 days & sold most of them within 30 days makes this a wash sale". I don't agree with that either. Thanks for your comments!

 

given2invest , Yes, I own another chunk(1000) which I bought them in 2009 for much lower price. So, I own 1200 now. As you can see this is not an exact replacement at all.

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Yes, I own another chunk(1000) which I bought them in 2009 for much lower price. So, I own 1200 now. As you can see this is not an exact replacement at all.

 

if you owned 1000 (1200 now?) shares prior to buying 800 shares which you then sold at a loss within 30 days then, yes, it should have created a wash sale.but your loss would cause an offsetting increase in your cost basis on your older 1000 shares. when you sell those you effectively realize your earlier deferred loss on the 800 shares.

 

i've noticed that my brokerage, fidelity, on a buy & sale of a 1000 shares (and assuming i didnt own any older shares bought before then, unlike the case you present) will generate a wash sale on the earlier batch of sold shares (say the 1st 500) along with a disallowed loss on them but the later batch of sold shares (the last 500) make up for those because they were given a higher adjusted cost basis equal to the losses on each of the earlier wash sale shares.

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Yes, I own another chunk(1000) which I bought them in 2009 for much lower price. So, I own 1200 now. As you can see this is not an exact replacement at all.

 

if you owned 1000 (1200 now?) shares prior to buying 800 shares which you then sold at a loss within 30 days then, yes, it should have created a wash sale.but your loss would cause an offsetting increase in your cost basis on your older 1000 shares. when you sell those you effectively realize your earlier deferred loss on the 800 shares.

 

i've noticed that my brokerage, fidelity, on a buy & sale of a 1000 shares (and assuming i didnt own any older shares bought before then, unlike the case you present) will generate a wash sale on the earlier batch of sold shares (say the 1st 500) along with a disallowed loss on them but the later batch of sold shares (the last 500) make up for those because they were given a higher adjusted cost basis equal to the losses on each of the earlier wash sale shares.

 

Yes, you created a wash sale.  There is no error.  It will change your cost basis on the remaining shares you have.  It doesn't have to be an exact replacement - you can't claim the losses on any of the shares since the total number is less than the 1000 you owned prior. 

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