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Author: smfish Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: wash sale Date: 2/21/2000 6:41 PM
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To any tax gurus out there!

Perhaps you can check my calculations on the Wash Sale (I hope, my first and last wash sale). I purchased stock at various times in 1999, for a total of 230 shares at a total cost of $23,272.74. On 09-20-99, I sold 230 shares for $19,057.99, for a $4,214.76 loss. Bought back 100 shares on 09-22-99 for $9,044.50. one hundred shares of two hundred thirty shares is .443%, so .566% of 4214.76 (loss) is $2,385.55, which I guess is my loss? Remainder of the loss, 4,214.76 minus 2,385.55 is $1,829.21, which I guess is added to the cost of 100 shares, $1,829.21 + 9,044.50 = 10,873.71, for my new cost basis on 100 shares.

I would appreciate any help you can give me. Thanks
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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: 29520 of 121061
Subject: Re: wash sale Date: 2/21/2000 8:39 PM
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smfish writes:

Perhaps you can check my calculations on the Wash Sale (I hope, my first and last wash sale). I purchased stock at various times in 1999, for a total of 230 shares at a total cost of $23,272.74. On 09-20-99, I sold 230 shares for $19,057.99, for a $4,214.76 loss. Bought back 100 shares on 09-22-99 for $9,044.50. one hundred shares of two hundred thirty shares is .443%, so .566% of 4214.76 (loss) is $2,385.55, which I guess is my loss? Remainder of the loss, 4,214.76 minus 2,385.55 is $1,829.21, which I guess is added to the cost of 100 shares, $1,829.21 + 9,044.50 = 10,873.71, for my new cost basis on 100 shares.

I reply:

You're correct that you have a wash sale, but you can't divvy up the basis of the underlying shares in the way you describe. You need to calculate for each separate purchase whether you had a gain or a loss. Once you've located the first 100 shares on which you sustained a loss, you can stop. The loss on those 100 shares is disallowed and added to the basis of the shares you purchased on September 22. You may recognize your remaining loss.

This analysis assumes that you purchased no shares on or after August 21, 1999. If this assumption is wrong, than you may have had another wash sale. If you post back with dates and figures, someone may be willing to give you more detailed help. If you do, please format the figures to be easily readable. Thanks. --Bob

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Author: smfish Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29651 of 121061
Subject: Re: wash sale Date: 2/22/2000 7:20 PM
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Thanks for the info. Bob78164.

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29750 of 121061
Subject: Re: wash sale Date: 2/23/2000 2:52 PM
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smfish writes:

Perhaps you can check my calculations on the Wash Sale (I hope, my first and
last wash sale). I purchased stock at various times in 1999, for a total of 230
shares at a total cost of $23,272.74. On 09-20-99, I sold 230 shares for
$19,057.99, for a $4,214.76 loss. Bought back 100 shares on 09-22-99 for
$9,044.50. one hundred shares of two hundred thirty shares is .443%, so .566%
of 4214.76 (loss) is $2,385.55, which I guess is my loss? Remainder of the loss,
4,214.76 minus 2,385.55 is $1,829.21, which I guess is added to the cost of 100
shares, $1,829.21 + 9,044.50 = 10,873.71, for my new cost basis on 100 shares.

I reply:

You're correct that you have a wash sale, but you can't divvy up the basis of the
underlying shares in the way you describe. You need to calculate for each separate
purchase whether you had a gain or a loss. Once you've located the first 100 shares
on which you sustained a loss, you can stop. The loss on those 100 shares is
disallowed and added to the basis of the shares you purchased on September 22.
You may recognize your remaining loss.

This analysis assumes that you purchased no shares on or after August 21, 1999. If
this assumption is wrong, than you may have had another wash sale. If you post back
with dates and figures, someone may be willing to give you more detailed help. If you
do, please format the figures to be easily readable. Thanks. --Bob


I think shat Bob is saying is that the problem is that you can't use profitable trades to offset losses on the same date. I think you have to take all the shares on which you had a gain and report them (you can probably make this one trade with "various" as purchase date). Then the remaining total loss is pro-rata on a share basis versus the 100 Replacement shares to determine your Wash Sale, adjustment, and basis and date change on the 100 shares. Since they are all losses you can bunch them together with "various" as purchase dates.
Ed

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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: 29770 of 121061
Subject: Re: wash sale Date: 2/23/2000 7:53 PM
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edcosoft writes (in part):

Then the remaining total loss is pro-rata on a share basis versus the 100 Replacement shares to determine your Wash Sale, adjustment, and basis and date change on the 100 shares.

I reply:

Not necessarily. You must also use FIFO accounting to determine which losses are disallowed if the sale of more than 100 shares (the number of replacement shares purchased) resulted in a loss. For example, suppose you had three separate purchases of 50 shares each, all of which resulted in losses of various sizes (because they were purchased at different prices), together with another purchase of 80 shares that resulted in a gain. Then the loss on the two earlier 50-share lots is disallowed, but the loss on the final 50-share lot is realized in full. You do NOT take disallow two-thirds of the entire loss due to the wash sale rule, you disallow the loss on two-thirds of the shares, which may well be different. --Bob

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29790 of 121061
Subject: Re: wash sale Date: 2/23/2000 11:07 PM
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Then the remaining total loss is pro-rata on a share basis versus the 100 Replacement shares to determine your
Wash Sale, adjustment, and basis and date change on the 100 shares.

I reply:

Not necessarily. You must also use FIFO accounting to determine which losses are disallowed if the sale of more than 100
shares (the number of replacement shares purchased) resulted in a loss. For example, suppose you had three separate
purchases of 50 shares each, all of which resulted in losses of various sizes (because they were purchased at different
prices), together with another purchase of 80 shares that resulted in a gain. Then the loss on the two earlier 50-share lots is
disallowed, but the loss on the final 50-share lot is realized in full. You do NOT take disallow two-thirds of the entire loss
due to the wash sale rule, you disallow the loss on two-thirds of the shares, which may well be different. --Bob


I stand corrected, you're right Bob. I presume you agree with the other part of my post? ed

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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: 29795 of 121061
Subject: Re: wash sale Date: 2/23/2000 11:52 PM
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edcosoft writes (in part):

I presume you agree with the other part of my post?

I reply:

Yep. Your software does handle this situation correctly, doesn't it? ;-) --Bob

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Author: edcosoft Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29846 of 121061
Subject: Re: wash sale Date: 2/24/2000 12:00 PM
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edcosoft writes (in part):

I presume you agree with the other part of my post?

I reply:

Yep. Your software does handle this situation correctly, doesn't it? ;-) --Bob


Boy, would I be embarrassed if it didn't, however, as you can imagine the computations and permutations of multiple Wash Sales and triggers of different amounts would make it impossible to create a program to actually make those adjustments. the ones that claim they do won't operate if you hold positions overnight. Therefor our D-1 program doesn't do the actual adjustment.

We just find virtually all the Wash Sales and triggers in each equity, arrange them in an order where you can easily spot the ones we miss, and our newest update will actually find ALL the Wash Sales (short and long) and show you where the FIFO Replacement Shares are, as well as quite a few later ones we found, and the ones you found, all on one screen for each equity. The user then follows the "Rules", splitting up the lots as necessary and enters the adjustments (or lets them ride in anticipation of not making any adjustments, or doing it later, or just adds up te amounts for his quarterly estimate). As you can imagine this could really get complicated if the program made the adjustments also, but we go from a random entry of stocks (long and short) and options and with two Macros do all the above for each equity you trade, and then after you make your adjustments and check them again, the program prints your D-1s for you, eliminates the closed trades from the prior year and keeps going with your open position and closed trades for the next current year!

I knew the Rule you corrected me on, but I got off on a different thought track when I wrote that. Sorry, but thanks for catching it and knowing we do have a D-1 program. It is not on our web site yet, but the old version is avilable if you e-mail us for it. Ed

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