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Hello, Tax Strategy Fools. I have a wash sale question.

In April of '99, I bought 82 shares of Worldcom at $58 apiece, for a cost basis of roughly $4750. This year, WCOM has gone into the dumper w/most of telecom, so I figured I could chop my tax bill by selling this year and then buying back after the 30-day period required by the wash sale rules.

Since WCOM was recently trading at $16, I stood to realize a loss of 82*(58-16), or roughly $3400.

But, then... I did a very dumb thing.

Instead of hitting "SELL" on my online trading page, I hit "BUY", which instead of closing out my position, doubled it. (Bought another 82 shares, at roughly $16).

After realizing my mistake and kicking myself repeatedly, I sold the whole position (164 shares at about $16).

Now I'm wondering where I stand w/regard to those accursed wash sale rules. Since I bought shares within 30 days of selling, will my juicy $3400 loss this year be disallowed?

I've breezed through IRS Publication 550, and my current theory is that the wash sale rules will indeed disallow the $3400 loss on the 82 shares purchased in April of '99. That $3400 will instead go to an increase in my basis on the 82 shares I mistakenly bought recently in Dec. 2000. And, since I sold those "Dec. 2000" 82 shares as part of the total 164-share sale, I will be able to claim the $3400 loss as part of the sale of my "Dec. 2000" 82 share block of WCOM.

Another thing I remember which supports this is that I recall from TMF Taxes' wash sale column a statement that if you close out your position prior to the end of the tax year (which I've done) and then stay out for 30 days after the sale(which I definitely plan to do), that you're OK, tax-wise. (Apologies if this is mis-remembered)

So, bottom line, I still think I can deduct my $3400 loss in spite of my own stupidity.

Have I missed anything?

Thanks much,
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