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Hello again,

I have two stocks I would like to talk about and get a anser for my questions.

No. 1 I have purchsed 500 shaes Lucent Feb. 8 and sold Feb 24 for a gain. I purchased 1000 shares on Feb. 25 and sold same day for gain. I purchased 500 shares on Mar. 1 and took a loss on April 14th of $10,358.99. I have no more shares at this time.

I now have purchased 1000 shares today July 20th over 90 days later.

Do I have a wash or loss above? and do I add the loss or wash to my new purchase of Lucent?


No. 2 I have purchase 1000 shares of Schwab Feb. 28 and sold for gain Feb. 29. I did the same on Mar. 24 for gains. I purcased 1000 shares on Mar. 27 and sold for a loss on April 14th for $22,983.74

Is this a wash or loss? and I still own 7000 plus shares of Schwab. What do I do with this loss or wash and what happens if I buy another 1000 shares?


thanks

Mike
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No. 1 I have purchsed 500 shaes Lucent Feb. 8 and sold Feb 24 for a gain. I purchased 1000 shares on Feb. 25 and sold same day for gain. I purchased 500 shares on Mar. 1 and took a loss on April 14th of $10,358.99. I have no more shares at this time.

I now have purchased 1000 shares today July 20th over 90 days later.

Do I have a wash or loss above? and do I add the loss or wash to my new purchase of Lucent?


For starters, wash sale rules apply only when you sell for a loss, so you can ignore your sales for gains. Since you owned no shares of LU 30 days after the loss sale, you recognize the loss on your taxes.

No. 2 I have purchase 1000 shares of Schwab Feb. 28 and sold for gain Feb. 29. I did the same on Mar. 24 for gains. I purcased 1000 shares on Mar. 27 and sold for a loss on April 14th for $22,983.74

Is this a wash or loss? and I still own 7000 plus shares of Schwab. What do I do with this loss or wash and what happens if I buy another 1000 shares?


A couple of questions for you. What is your entire history with this stock, and did you specifically identify the shares being sold in the transactions you recounted?

TMF ExRO
Phil Marti
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No. 2 I have purchase 1000 shares of Schwab Feb. 28 and sold for gain Feb. 29. I did the same on Mar. 24 for gains. I purcased 1000 shares on Mar. 27 and sold for a loss on April 14th for $22,983.74

Is this a wash or loss? and I still own 7000 plus shares of Schwab. What do I do with this loss or wash and what happens if I buy another 1000 shares?

A couple of questions for you. What is your entire history with this stock, and did you specifically identify the shares being sold in the transactions you recounted?

Hi Phil:

I have purchased the SCH stock many years earlier. It split and dividends reinvested over ten years. Only last year did I start to buy lots of 1,000 ( twice )low and sell when it went up never to touch the original shares. I did this year as above in NO 2.

I ID stock purchases and sales by reciving the conformations and staple them together. The lots I bought to the ones I ID that I sold. I do not use the FIFO rule. Then I put them in a binder.

So where am I with the SCH stock in the NO 2 above now?

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fool2009 writes (in part):

I ID stock purchases and sales by reciving the conformations and staple them together. The lots I bought to the ones I ID that I sold. I do not use the FIFO rule. Then I put them in a binder.

I reply:

I've got good news and bad news for you. The bad news is that you have, in fact, sold your stocks on a FIFO basis rather than specifically identifying them. In order to use specific identification on your tax return, you must communicate your intent to your broker contemporaneously with the sale. You didn't do that. (Even then, there is risk unless the broker writes back, confirming your identification.)

The good news is that since all of your stock sales were at a substantial profit, you have no wash sale issues. --Bob
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Hi Bob:

My broker, Charles Schwab states that I can ID the stocks nay way I wish and that they do not ID stock trades. I went over this with them in great detail.

For there are other trades that I bought first and sold at a latter date for proffits instead of FIFO losses.

What od you think?
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fool2009 writes (in part):

My broker, Charles Schwab states that I can ID the stocks nay way I wish and that they do not ID stock trades. I went over this with them in great detail.

I reply:

I think that they've done you a considerable disservice. It's not necessary to qualify for the safe harbor in order to specifically identify stock transactions, but some communication with the broker is clearly necessary. A lot of brokers take the position you've described, but the clear consensus on this board is that they're all wrong. You might also check out www.fairmark.com , which is run by tax attorney Kaye A. Thomas (known hereabouts as KATinChicagoLand). (I wonder if he has a Soapbox?) --Bob
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The Motley Fool's Investment Tax Guide 2000 page 50.

Talks about a court ruling that states " the Tax Court has stated that these regulations are really a safe harbor, and not the "exclusive" means of adequately idenifying stock sold to avoid the FIFO accounting
method."

So what does this mean?
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Well now I am in a fix. What about I purchased a lot or 3Com on March 1st and sold for a loss March 1st.

Then repurchased a lot on March 2nd and sold March 2nd for a loss and never got back in.

I belive the first loss to be a wash and rolled over the loss into the cost of March 2nd lot.

Would this be a bonifide Loss now for the year?

thanks

Mike
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FoolMMIX:

Re: the FIFO and specific identification rules for your recently traded Schwab stock.

Are your several thousand shares of Schwab "from many years ago" held at the same brokerage where you traded Schwab this year?

If they're *not* at the same brokerage, your identification problem may be solved, since only the recently acquired shares were held at Schwab, and therefore only the recently acquired shares could be sold by Schwab.

--
LoTax
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fool2009 writes (in part):

Would this be a bonifide Loss now for the year?

I reply:

Are you now completely out of the stock? If so, then yes. --Bob
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Open a FREE trial a/c at http://www.GainsKeeper.com and enter all the transactions you mentioned above. It will automatically prepare your Schedule D in real-time, clarifying all your doubts. I just evaluated the website and here is what I have to say about it
(as well as for http://www.SellSignal.com):

GainsKeeper.com
===============
It was fairly easy to open a new a/c and get started. The site doesn't look as attractive as SellSignal.com, but is well organized. It offers a FREE 30-day trial (no need for credit card info for this), and charges
$35/year (for upto 99 trades/year) beyond that period. The charges are $99/year for 100-499 trades/year and $199/year for 500+ trades/year.

To begin with, I keyed in my portfolio (consisting of about 35 transactions) sorted by the different brokerage accounts I had. Everything was quite intuitive and easy. I could either set up my own
brokerage account or select from a list of available popular brokers. It also had no problems with fractional shares (which I have in my BuyAndHold.com a/c) unlike SellSignal.com which would only accept whole shares. I could either enter the total cost of the transaction or the number of shares bought/sold along with the commission. Once everything was keyed in, I was all set to generate my tax reports. I was impressed with the reports! GainsKeeper keeps track of all the corporate actions (splits, dividends, etc) and includes them in your report, hence it saved me the hassle of converting some of my old holdings (like CSCO) on a split-adjusted basis. It automatically recognized wash sales (I had a few, which had been a big headache for me) and adjusted the capital gains accordingly. It also did tax-lot accounting, marking and tracking each lot of the same stock separately, as required by the IRS. I could generate an aggregated report for all my trading accounts (optionally in Adobe PDF format which is ideal for printing) for my realized capital gains/loss for the calendar year with one click, which I could simply attach with my Schedule D at the time of filing the taxes!

All in all, this seemed like a very useful service, especially for people who trade often and want to avoid the hassle of filling their Schedule D at tax-time. This is a *major* time-saver!! This is also an ideal service for novices who do not know much about tax rules governing wash-sales and lot accounting. Another use for GainsKeeper is to evaluate the implications of any buy/sell transaction on your taxes before actually carrying them out (although this feature is not offered explicitly; but one can always enter the buy/sell as a dummy transactions to see their effect on the taxes, and then easily delete them later with a single click). The site also has an "Education" section where it answers some basic questions on investment-related taxes, a very useful addition indeed. Among the cons, GainsKeeper does not handle short sales and options (luckily, I don't have any yet!), which might turn off the active trader from utilizing their services.

SellSignal.com
===============
Opening a new a/c and getting started was straightforward. The site seems very attractive and well organized. The service is totally FREE. However, the site was inaccessible several times for random
intervals during the testing process, thus making the experience very irritating!

Keying the portfolio was easy. However, I could not add a broker of my choice, and had to choose from the ones supplied (there was an "other" option though). The application would not accept fractional shares, hence I had to round up my holdings in BuyAndHold.com which lead to inaccuracies in the portfolio. I also had to calculate the post-split values for some of my holdings (CSCO for instance) before keying in, as the program would not keep track of such Corporate Actions (CA). The program did detect wash sales automatically, but messed up all the calculations as it follows a HIFO (Highest Cost In First Out) lot management technique as opposed to the conventional FIFO (First In First Out) technique. In doing so, it was prone to selling the shares bought via broker A using broker B and mess up all the calculations! Moreover, there was a major bug in the accounting scheme, which would calculate the total cost of the holdings incorrectly (off by a mile!) after a wash sale was detected. This would mess up the entire portfolio!! As a consequence, the Schedule D was also incorrectly calculated. On the up side, there was some good tax-related information available for browsing in the "Education" section, although not a whole lot. There was also a "SellSignal" indicator associated with every stock, which as the name suggests, advises the user whether to buy, sell or hold the equity at any given time based on certain parameters which the user can set for the portfolio. There are also some useful portfolio alerts that get triggered based on certain preset criteria, and the program also provides some basic alerts to realize gains or losses based on the current Schedule D status, so as to minimize the Capital Gains taxes to be paid (a very neat feature indeed!).

Conclusion: While the service is FREE, promises a lot, and is quite good, it is not 100% accurate and thus useless for tax-filing purposes. It is designed mainly for the long-term investor and does not handle
short sales and options.

-anirudh
http://www.anirudh.net
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