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I used the program recommended on this board for
calculating wash rules (Wash Sale Schedule D generator
at http://hometown.aol.com/softwaydev/fsdg.html URL).
But the results don't seem to be quite what I expected
by reading the IRS pub 550 section on wash rules.
Could someone tell me if program is right or not?

Here is the trading history on stock in question.

# Date Buy/Sell Shares Price

1) 2/15/00 Buy 200 177
2) 3/21/00 Buy 100 88
3) 4/04/00 Buy 100 63
4) 4/14/00 Buy 200 85
5) 5/01/00 Sell 200 90

My understanding is like this:

Because of FIFO rule, the sell transaction #5 is
applied to the buy transaction #1 and results in a
loss of 87 per share. Shares in transaction #2 are
safe from wash rule, since they are more than 30 day
away from the sale. 100 shares in transaction #3 are
affected by wash rule and their basis is increased by
87 to 150.

What about the loss on the other 100 shares that were
sold? Program didn't do anything with them and said
that I have a short term capital loss of 8700. Near
as I can see from the rules in pub 550, instead of
using that 8700 as capital loss, I must apply it to
the shares I bought in transaction #4. So, after wash
rules are applied, I have 100 shares from transaction
#3 at basis of 150 per share, 100 shares from
transaction #4 at 172 per share and 100 shares from
transaction #4 still remaining at basis of 85.

So, is the program wrong or did I misunderstand something?


You are absolutely correct, evidently the program is wrong. We publish the "other" program at http://www.edcosoft.com which does not make the adjustments, just finds all the wash sales so you can adjust them (which is pretty easy) for just this reason. There are several ways to avoid having to make the adjustments which a program couldn't judgementally make, and sometimes they get so complicated I wouldn't want to trust my tax records to a program that will alter them according to a set of programed rules. Our program also will find your wash sales in shorts and options which gets even more arbitrary as to what is and isn't Replacement Shares. ed

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