Taxes on stock trading gains

Ok, at that point you have a long-term capital loss of $10/sh or $1000 overall.

That turned the previous sale into a wash sale. The $1000 loss is disallowed and the loss and the previous position's holding period is tacked on to the new position.

In other words, instead of having a $1000 loss and a short-term holding of 100sh with a basis of $80/sh or $8000 overall, you have *no* loss and a *long-term* holding of 100sh with a basis of $90/sh or $9000 overall.

This is reported on your Schedule D (in the long-term section) as follows: Description Acq Date Sale Date Proceeds Basis Gain/(Loss) 100 XYZ 10/7/2006 10/7/2008 $9000 $10000 ($1000) WASH SALE $1000

The repurchase isn't reported until it is ultimately sold. When it is sold, its basis is $9000 (=$8000 "raw" basis plus the $1000 disallowed loss) and its holding period is deemed to begin in 2006, not 2008 (because you have to add on the holding period of the "washed out" position.

-- Rich Carreiro snipped-for-privacy@rlcarr.com

What "gain"? You have a (longterm) capital loss of (90-100)/share.

You then simply used part of the remaining initial purchase returned to by the stock again at a lower initial basis for a subsequent sale at a future time/price.

There is no gain. Your loss of $10/share is a wash sale, so you don't get that either.

Now suppose the original price was $10/share. There's a taxable profit of $80/share, so the day trade which appears to make $10/share is actually cashflow negative.

If you expected the price to drop so you'd buy it back cheaper, you're better off selling short ("against the box") at $90/share, and closing the short sale at $80/share. The generates only $10 in taxable income (short-term capital gains).

Seth