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Author: Bob78164 Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121599  
Subject: Re: wash sale Date: 1/30/2002 7:41 PM
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cawc writes (in part):

Also, does it matter which "lot" I specified to the brokerage to sell since it is not reported anywhere?

Here's my buy/sell history in company xyz:

2/17/00 buy 1000 @ 1.45 with costs total 1469.95
2/24/00 buy 3350 @ 1.07 with costs total 3604.45
3/9/00 buy 1100 @ .99 with costs total 1108.95
6/6/00 buy 4550 @ .345 with costs total 1589.70
1/3/01 buy 19000 @ .059 with costs total 1140.95
1/16/01 sell 15000 @ .102 minus costs total 1510.05


I reply:

If you did not effectively specify the shares you sold on 01/16/01, then you are stuck with the default FIFO rule. In that case, your sale was for a loss, so the 01/03/01 purchase, which was within 30 days of the sale, triggered the wash sale rule and the loss on 11,000 shares is disallowed. The remaining 4,000 shares were sold for a gain, which must be recognized. The disallowed loss is added to the basis of the shares you still hold. In addition, your holding period on your shares "relates back" to your previous purchases, so your losses will soon become long-term.

However, this possibility is better than what would have happened if you'd specified that the shares you sold were all from the block purchased on 01/03/01. In that case, you would have a short-term gain on all 15,000 shares. So failing to avoid the wash sale rule is not necessarily a bad thing. --Bob
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