Correcting for wash sales

Could somebody check my "Quicken math" on this?
I buy 100 shares of ABC on 1/1/05, and sell all 100 on 3/1/05 for a $25
loss.
I then buy 10 shares of ABC @ 10 ea. on 3/15/05 (total cost: $100). I
don't sell them during 2005.
The sale on 3/1/05 is now a wash sale. So I:
- Add a $25 offsetting transaction to my Schedule D spreadsheet
- Change the "Buy" on 3/15 into an "AddShares/ShrsIn" so I can set the lot
date to 1/1/05
- Add a MiscExp transaction on 3/15 for $100 since I did really buy the
shares
- Add a RtrnCap transaction on 3/15 for $25 to offset the loss
Is that right? Is that the best way to do this?
Jay Levitt
Reply to
Jay Levitt
Only ten shares is a wash sale...
Sell 90 shares of the first transaction for a 22.50 loss. Sell 10 shares of the first transaction for break even. Adjust the basis of the 10 share buy...by -2.50 .
Reply to
A Count
As a matter of tax law - of which I'm no expert - I think you could claim 90% of the loss since 10/100 = 10%. However, we'll stick with your premise that the full $25 has to be added to the basis of the 3/15/05 purchase.
I did it this way:
Left the 1/1/05 Buy and 3/1/05 Sale alone.
Entered an ABC stock RtrnCapX transaction between the Buy and Sell dates for $25. (Doesn't affect cash, results in no gain/loss on 3/1/05 which is the situation for tax purposes, if not GAAP purposes.)
Added the 10 shares of ABC @ $10/sh on 3/15/05 with a lot date of 1/1/05
Entered an ABC stock RtrnCapX transaction on 3/15/05 for ($25). (Doesn't affect cash, adds to $100 actual cost basis of new 10 shares.)
Did an XOut transaction of $100 on 3/15/05. (Gets cash in account correct for 3/15/05 purchase, doesn't show up on a Income/Expense report.)
Of course, I'd document as much as I could in each entry's memo field so I could figure out what the hell I did here when I was looking at these entries 2 or 3 years down the road. :-)
Tom Young
Reply to
TomYoung
I did not realize that! I was reading the fairmark.com guide to wash sales instead of the actual IRS pub, and they never deal with the case where the lots are different sizes. Argh. Thanks for pointing that big mistake out.
Makes sense. I'm just editing the Schedule D output manually in Excel, which accomplishes the same thing for tax purposes.
Ah! Right, that RtrnCap needs to be negative. I discovered that when I found that selling a lot with a negative cost basis does verrry interesting things in Quicken.
Perfect. I'll use XOut instead of MiscExp, which (turns out) affects the cost basis.
And yes, I'm commenting heavily on each of these, plus saving the Excel file which contains a list of wash sales...
Thanks a bunch for the pointers.
Jay
Reply to
Jay Levitt
When I'm buying more shares than are involved in the wash, do you see any harm in moving this into the commission field of the remaining Buy transaction? It's a nice easy thing to do, since Quicken will automatically update that field for you as soon as you drop the number of shares.
Also, how'd you do an XOut without a transfer-to account? Q07 won't allow me to do that.
Jay Levitt
Reply to
Jay Levitt
I rarely visit this group, hence the delay in replying.
I'm not really following your first question so I'll pass on attempting an answer.
As for the second question, I'm using Quicken 2004 Deluxe (heck, I'd still be using Quicken 199X if Quicken didn't force me to upgrade just to get automatic quotes) so the process is to initiate a "Cash Transferred out of Account" transaction then make the "Transfer Account" (the account receiving the cash) the same account as the one you're in. The effect of such a transaction - and Quicken has been consistent in its application for as long as I can remember - is a reduction in cash in the transferring account and a reduction in net worth, i.e.,:
Debit Net Worth $100 (Reduction)
Credit Brokerage Account Cash $100 (Reduction)
Without having Q2007 installed I'm not sure exactly how you'd do it in that version, but I'd guess that it *can* be done.
Tom Young
Reply to
TomYoung

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