False wash sales recorded?

I'm looking at cap gains forms from a reputable brokerage, with seemingly random
and false claims of wash sales disallowed. Say I buy 10 shares of x and sell it
2 weeks later at a loss and never buy it again... that doesn't comprise a wash
sale, does it?
If not, might I guess the problem is the way they shattered my single 10 share
transaction request in both the buy and sell? Say they bought it as 3 and 7
shares at slightly different prices the same day. Then they sold as 6 and 4
shares 2 weeks later. Might they have problems matching this up, and assume my
buy 2 weeks earlier of at least 1 mismatching share was a wash according to the
strange 30 day lookahead+lookbehind approach?
Then do I just tell my tax software to somehow ignore the wash? Even if they
treated it as wash, wouldn't the basis adjustment make a weird loop? The only
other thing I can think of is I very rarely rebought stocks in an ira after
selling in regular account. Oh, the other very rare event is my one transaction
could straddle 2 days due to a limit order taking 2 days for partial fills.
thanks
Reply to
dumbstruck
In article ,
Yes, it does. You have a purchase within 30 days of selling at a loss.
You know that these are the only shares you own, so it's a complete disposition and that cancels the wash sale. But the broker doesn't know this, because you could have an account with another brokerage with shares of x.
Just ignore the wash sale when doing your taxes.
I think when you tell TurboTax that a sale is a wash, it asks you if you've completely disposed of the holding, and does the right thing.
Reply to
Barry Margolin
Barry - (forgive me if this comes off as pedantic)
IRS wash sale definition -
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:
Buy substantially identical stock or securities
Are you suggesting that any sale at a loss within 30 days of a purchase is a wash sale? DS stated a simple purchase then full sale of shares. Why would you consider that a wash sale? Worse, 'any' sale at a loss would fit the bill, as you suggest, since a sale at a loss regardless of time held, could be a wash on repurchase within 30 days.
Reply to
JoeTaxpayer
That's within the definition of a wash sale, so yes, it's a wash sale. However it qualifies as an exception to the wash sale rule.
Again, yes, it's a wash sale, but excepted from the non-recognition rule.
Well, yeah, that's the purpose of the rule. If you sell it at a loss (no matter how long you have held it) and then buy it back within 30 days, you are not allowed to recognize the loss at that time.
Reply to
Stuart A. Bronstein
Stu - the OP for this thread had a purchase and then a sale at loss. The above definition requires a repurchase. My understanding is (a) a single purchase and single sale (with no subsequent repurchase) is never a wash sale and (b) if no shares are held at year end, while the timing may show wash sales during the year, it's rendered moot by year end.
Reply to
JoeTaxpayer
responding to
Joe,
I'm trying to integrate the conversation we all had regards my Vanguard post with this conversation - Barry is saying , I think, that there is a wash sale but since it's a closeout of the shares , the loss is recognized - I thought everyone was in agreement on that with my post ?
Don
Reply to
Don
In article ,
Yes, that's true. That's why I said that even though this is a wash sale, he can ignore it when he's preparing his taxes -- the complete disposition cancels out the disallowed loss.
As far as I can tell, the wash sale definition doesn't care if the shares you purchased within 30 days of the sale are the same shares you sold. Those shares aren't just "substantially identical", they're *actually* identical.
For instance, consider the following timeline:
Day 0: Buy 1 share @ $100, call this Lot A Day 40: Buy 1 share @ $150, call this Lot B Day 50: Sell Lot B @ $125, loss of $25.
The sale on day 50 is a wash sale, because you had a purchase within 30 days of it; it doesn't matter that this was the same lot. The $25 loss is disallowed, and added to the cost basis of Lot A.
Reply to
Barry Margolin
Don/Barry - but this thread was "Say I buy 10 shares of x and sell it 2 weeks later at a loss and never buy it again..."
And, I believe a simple sale, one buy, one sell, is not a wash sale at all.
I agree that your example is perfect, a well illustrated wash sale.
Reply to
JoeTaxpayer
your broker indicates it is a wash sale probably because they don't know what else you are doing, outside of their brokerage. But your situation is not a wash sale in that you have not bought "substantially identical" shares - they were "absolutely identical" shares.
1: Selling All On June 1 you buy 200 shares of XYZ for $10,000. On June 12 you sell all 200 shares for $8,000 (a loss of $2,000).
Most people wouldn't even think about applying the wash sale rule here. You know instinctively it shouldn't apply, even though there's a purchase of identical stock less than 31 days before the sale. Your instincts are correct: the wash sale rule doesn't apply because the stock you bought isn't replacement stock for the stock you sold. That's true because you sold the same stock you bought.
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Reply to
Pico Rico
In article ,
How is that different from transactions 2 and 3 in my example?
They're both wash sales. The difference is that if you sell everything, you get to take the loss anyway, for the reason explained in the Vanguard thread.
Reply to
Barry Margolin
See TD 9054 for the final regulations on reporting cost basis and you will understand why a broker reports it as a wash sale.
Reply to
Alan
Well, your example was clear. But my OP quote is one buy, one sell. I may be dense (ask my wife) but buy, then sell all shares at a loss and that's not a wash sale. OP had no third transaction.
Reply to
JoeTaxpayer
Read the statute. Section 1091(a) says that it's a wash sale when,
"within a period beginning 30 days before the date of such sale or disposition and ending 30 days after such date, the taxpayer has acquired,... substantially identical stock or securities..."
The definition only requires one purchase and one sale. There is no requirement for there to have been a third transaction where the taxpayer owned the stock in advance.
Reply to
Stuart A. Bronstein
responding to
Barry,
might you want to modify your thesis by saying " if you have a closeout with at least two accompanying buy transactions, then any capital loss incurred will be preserved due to a cost basis mark-up despite any disallowed loss due to the wash sale rules "
just a thought since all the examples in these posts that support your original contention involve at least 3 transactions.
Don
Reply to
Don
That is correct. Look at the wording of the statute:
(a) Disallowance of loss deduction 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 date, the taxpayer has acquired (by purchase or by an exchange on which the entire amount of gain or loss was recognized by law), or has entered into a contract or option so to acquire, substantially identical stock or securities, then no deduction shall be allowed . . .
A single purchase and a full disposition is not a situation where it "appears" that "substantially identical stock" was acquired.
Also, look at section (d) of the statute, which adjusts the cost basis due to the disallowed loss. If this WAS a wash sale, the cost basis would be adjusted per section (d), but you give it a try. It doesn't work out in this non-wash sale example.
Reply to
Pico Rico
Where is this "exception" in the statute"? In the regs? Anywhere?
No, it is not a wash sale, and no such exception exists.
Reply to
Pico Rico
Thanks, that at least gives some idea of what the rule is trying to address. A pretty small issue of opportunistically switching from fifo to lifo, but one we would probably all have to waste our time doing if it was allowed.
But I was puzzled by the randomness of my brokerage applying it to my sudden losing closeouts. It often choose just a few shares out of one transaction to flag as a wash. Or none, or all in other cases. These were all only one buy and one closeout as market orders.
It doesn't matter, but I wonder if it due to the way they increasingly seem to implement trades in tiny increments. This year I watched a limit order execute about a half fill at a price that violated my limit substantially. A couple hours earlier they completed the deal in a way to make the average price equal my limit (maybe from their own inventory after being unable to find a greater fool trader). This could appear as a loss that I didn't plan for in avoiding washes.
Reply to
dumbstruck
In article ,
But see below.
But the same stock was acquired within 30 days.
Here's where it gets interesting.
Day 1, I buy stock for $100. Day 2, I sell it for $90. There's a loss of $10, disallowed due to wash sale.
I have to use the loss to increase the basis of the purchase. So now it's a basis of $110, sale at $90, loss of $20, disallowed due to wash sale.
I have to use the loss to increase the basis of the purchase . . .
This way lies madness.
Seth
Reply to
Seth

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