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Is this a wash sale? (2023 Update)

Scenario:

  • Taxpayer has three separate accounts.
  • Prior to any of this taxpayer has zero shares in XYZ anywhere.
  • On the same day, taxpayer buys some XYZ in all three accounts.
  • On a later day -- but less than 30 days out -- taxpayer liquidates the XYZ position at a loss in one of the accounts.
  • Taxpayer does not do any more purchasing of XYZ in any account for at least 30 more days from that sale.

Is this a wash sale?

On one hand it seems to fit the literal rules -- there was a sale at a loss within 30 days of a purchase.

On the other hand, there was a net decrease in the combined XYZ position and that net decrease lasted over 30 days from both the original purchases and the sale so there's no "I'm realizing a loss but am basically negating the economic effect of the sale on me" thing going on.

So is it a wash sale or not?

Reply to
Rich
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That should not be a wash sale. A wash sale involves acquiring "substantially identical stock or securities...." It doesn't apply to the same securities if you only buy them once and don't replace them.

Reply to
Stuart O. Bronstein

The wash sale rule is a tax rule that disallows a tax deduction for a loss on the sale of a security if the taxpayer, within 30 days before or after the sale, acquires a "substantially identical" security. The rule applies to both purchases and sales of securities, and it applies to all accounts, including individual and joint accounts, as well as traditional and Roth IRAs.

Based on the scenario you described, it appears that the taxpayer has bought the same security on the same day in multiple accounts and then sold it at a loss in one of the accounts.

The key question in determining whether a wash sale has occurred is whether the security sold at a loss is "substantially identical" to the security that was acquired within 30 days before or after the sale. In this case, the security sold at a loss is the same security that was bought on the same day in multiple accounts. Therefore, it appears that the security sold at a loss is "substantially identical" to the security that was acquired.

It's important to note that the 30 day window applies to the date of sale and the date of purchase, not to the net decrease of the position.

As a result, it appears that the * taxpayer has engaged in a wash sale*, and the loss on the sale will not be allowed to be claimed as a tax deduction.

It's recommended that you consult with a professional tax advisor to help navigate the process and ensure that you are following the correct rules and regulations

Reply to
Smart Bean

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