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Financial Planning / Tax Strategies
|Subject: Re: Yet another Wash Sale question||Date: 7/17/2013 4:14 PM|
|Author: irasmilo||Number: 118891 of 121114|
You have the following:
50 shr @ $4 = $200
50 shr @ $7 = $350
Total basis: $550
100 shr @ $5 = $500
This gives you $50 loss within 30 days of a buy for the same or similar security and the Wash Sale rules apply.
In the general case, your logic and your math are wrong as far as taxes go. When you sell multiple lots on the same day, you cannot use gains to offset losses for the purposes of the wash sale rules. See IRS Pub. 550.
So, if there were another purchase in the wash sale window, there would be $100 of potential basis adjustment.
Using only the facts as presented by the OP, it doesn't matter if you consider this a wash sale or not. With no wash sale, the math shown above yields a net $50 loss.
If you consider this to be a wash sale transaction, the sale of the old shares produces a $100 loss. This is then washed into the new shares, so there is no loss on the sale of the old shares, but the new shares have a cost basis $6/share ($300). The holding period is reset to the original purchase date and the sale of the new shares with the adjusted cost basis/holding period generates a $50 loss.
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