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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121254  
Subject: Re: Wells Fargo 1099 & Wash Sale Date: 5/17/2012 5:23 PM
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They can't both be correct, can they? And if so, how?

Yes, they can. Because the correct treatment is different for 1099 reporting and for reporting on your 1040.

For stocks both purchased and sold in 2011, the broker has to report the basis from their records. Until 1/1/2011, brokers were not required to track your basis in the stock. Any tracking they did was a courtesy to their customers.

The purchase of this stock was in 2011. The broker was not required to know the basis of stock acquired before 2011. Therefore, they were not required to make any wash sale adjustments for sales happening before 2011. The wash sale happened in 2010, before brokers were required to track basis.

It all hinges on requirements. The fact that they actually DID know your basis is irrelevant. They were not required to know, therefore they are not required to make any wash sale adjustments based on information they were not required to know.

You, on the other hand, ARE required to track your basis. And you're still required to track your basis, even with the broker's tracking. So it's up to you to report the wash sale adjustment and not your broker.

"There is a correct way to report these transactions: does this comply?"

The question "Is this correct?" is not a fact. It is an opinion. Facts are who, what, when, where, why, how. If you had asked the broker to confirm the purchase and sale dates and the related amounts for the stock in question, he would have happily complied. Those are facts.

As a CPA, I am qualified to give my opinion on the correctness of financial reporting. Keeping track of the difference between fact and opinion is critical to me.

Let me demonstrate.

If I said, "1 + 1 = 2," you would likely say that is correct. But you are assuming that I'm doing math using base 10. If you say that statement is correct you are expressing an opinion. If I were to tell you I am using binary numbers, the statement becomes incorrect. First off, there would be no "2" in binary numbers, so the statement wouldn't make sense at all. Secondly, using binary numbers, the correct answer is "10".

Do you now see how the question "Is this correct?" is asking for an opinion and not stating a fact?

--Peter

PS - By now you should realize that I am stating my opinion that the broker's reporting on the 1099 is correct. Hence, my initial comment in the thread starts off saying "I am of the opinion ..."
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