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I think I know the answer to this already, but want to double check with some folks that know their tax rules better than I do.

Let's say, I made the following trades:

1/1/2011 bought 200 shares of ABC at $7

5/10/2013 bought 50 shares of ABC at $4

5/20/2013 sold 100 shares of ABC at $5

I specifically identified the 100 share sale as including the 50 share purchase from 5/10 and 50 of the shares from 2011.

Would wash sale rules not apply because I sold all of the 5/10 shares on 5/20 for a gain so I recognize the cap gains in 2013 on those. Then the additional 50 shares purchased 5/20 with the 2011 cost basis don't have any other purchases in a 30 day window so I can take the loss on those in 2013?

Let me know if I am looking at this right.

thanks
m22
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There isn't a wash sale question in the trades you presented since you didn't make any new purchases after the 5/20/2013 sale of stock.
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There isn't a wash sale question in the trades you presented since you didn't make any new purchases after the 5/20/2013 sale of stock.

But the purchase was only 10 days before the sale. I stole the definition below from Investopedia.

Definition of 'Wash-Sale Rule'
An Internal Revenue Service (IRS) rule prohibiting a taxpayer from claiming a loss on the sale of an investment when the same investment was purchased within 30 days before or after the sale date. Also know as the "30-day wash-sale rule".
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The 50 shares bought on 5/10/2013 were sold at a profit. They don't create a wash sale.

The shares bought on 1/1/2011 were bought more than 30 days before the sale. There are no additional purchases in the 30 day window. The loss can be taken
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mekong22,

You have the following:

50 shr @ $4 = $200
50 shr @ $7 = $350
Total basis: $550

Sold:
100 shr @ $5 = $500

This gives you $50 loss within 30 days of a buy for the same or similar security and the Wash Sale rules apply.

IMO

Gene
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This gives you $50 loss within 30 days of a buy for the same or similar security and the Wash Sale rules apply.

There is no indication that the OP specified the newer shares were sold. Without identified which shares were sold, the default is the oldest shares were sold. In this case, the wash rules wouldn't apply since there were more shares bought in 2011 than sold in 2013. There is a gain on all the shares.

PSU
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From the original post.

I specifically identified the 100 share sale as including the 50 share purchase from 5/10 and 50 of the shares from 2011.
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From the original post.

Okay, I missed that. Thanks.
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You have the following:

50 shr @ $4 = $200
50 shr @ $7 = $350
Total basis: $550

Sold:
100 shr @ $5 = $500

This gives you $50 loss within 30 days of a buy for the same or similar security and the Wash Sale rules apply.


In the general case, your logic and your math are wrong as far as taxes go. When you sell multiple lots on the same day, you cannot use gains to offset losses for the purposes of the wash sale rules. See IRS Pub. 550.

So, if there were another purchase in the wash sale window, there would be $100 of potential basis adjustment.

Using only the facts as presented by the OP, it doesn't matter if you consider this a wash sale or not. With no wash sale, the math shown above yields a net $50 loss.

If you consider this to be a wash sale transaction, the sale of the old shares produces a $100 loss. This is then washed into the new shares, so there is no loss on the sale of the old shares, but the new shares have a cost basis $6/share ($300). The holding period is reset to the original purchase date and the sale of the new shares with the adjusted cost basis/holding period generates a $50 loss.

Ira
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Thanks everyone for your replies, much appreciated!
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