Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev | Next
Author: TMFTaxes Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: Re: Daytrading Wash Rule Date: 11/3/2000 4:57 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
<<If the wash rule applies for 30 days, then does that mean that daytrader can not deduct their loss if they bought within 30 days of their sell? If so that's true, how could you ever make money for DayTrading? Your losses are not deductible, and your gains are taxed against you.>>

But think about this for a second...daytraders generally get out of their positions entirely in a short period of time. Minutes. Days. Perhaps weeks. It's only near the end of the year that true daytraders have to be careful of the wash sale rules...when any open transactions might bridge two tax years.

As pointed out in my article on this very subject in the Taxes FAQ area, the wash sale rules become completely moot if the position is closed out sometime during the year, and no "replacement" shares are purchased either 30 days before or after the last loss sale.

So, for example, say you purchase 100 shares of XYZ company on January 10th for $50/share. January 20th, you sell those shares for $30/share. Then on February you repurchase 100 shares of XYZ for $25/share.

That's a wash sale.

But on April 10th, you sell your 100 shares of XYZ for $20/share. And you stay out of the stock within the required 30 day period before or after the loss sale.

Do you STILL have a wash sale? Sure. Is it important? Nope...not now. The wash sale rules have become moot. Simply report your purchases and sales as you normally would. Your ultimate loss would be the same computing the buys and sells the normal way and making the basis adjustments as the wash sale rules requires.

So the key is to not let any wash sales bridge two tax years. If you can avoid that, the wash sale rules actually become moot.

TMF Taxes
Roy

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev | Next

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement