Fidelity showing bogus(?) wash sale

Actually, it's a huge impact. I've already spent several hours trying to figure this out, and it's looking like I'll have to consider professional tax preparation to handle this $0.25 adjustment. I may well be out a few hundred dollars, because Fidelity happend to split a single order into two lots.

I'd love to simply ignore it, but Fidelity is presumably going to report it as a wash sale to the IRS.

I've search all over, and I've been unable to find a single example of a form showing a situation like this (a wash sale *and* the sale that recognizes the originally disallowed loss).

The instructions are, frankly, not clear. In particular, I've been unable to find any details on how I'm supposed to report the basis adjustment on the transaction that recognizes the originally disallowed loss.

I'm not (yet) using tax software. I always start with the forms themselves and use software (lately FreeTaxUSA) for sanity checking/ filing.

Regardless, the first trade (the lot with the disallowed loss) is straightforward enough. It's the "second trade" that is driving me crazy. The IRS instructions (and every web site that I can find) simply say that I should add the disallowed loss to the basis of the replacement security, but I can't find anything that tells me how to

I don't doubt that it's common. It makes the lack of any examples or clear instructions even more frustrating.

You don't have the 1099-B from Fidelity yet. Their trade confirmations don't necessarily show exactly what's going to be on the 1099-B. If they identified the wash sale I would expect them to make the corresponding basis adjustment on the 1099-B for the subsequent sale. Then all you have to do is enter what's on the 1099-B.

If the basis shown on the 1099-B does not include the adjustment for the previously disallowed loss, then the basis on the 1099-B is incorrect. When a 1099-B shows an incorrect basis, you use Code B on Form 8949 to adjust the basis. In the Form 8949 instructions, follow the instructions for code B to report the adjustment.

I didn't follow all the details of your situation. If you are talking about a 25-cent adjustment, it's going to disappear when everything gets rounded to whole dollars. And the IRS is not going to waste any time investigating a

Bob Sandler

Interesting. I wasn't aware that brokers actually reported the adjusted basis. Looking at the "tax information" table on Fidelity's site, though, I can see where they've adjusted it. (I didn't notice before because of the small amount.)

Code B, huh? Seems like that would be simple enough for the IRS or one of the multitudinous blogs/articles that discuss the wash sale rule to note this little factoid.

Likely not, right up until they do.

Thanks for the clear information!