Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 1
Please help me understand the change in cost basis if I sell my $15 shares. Suppose I sell all my $15 shares for $13.50 for a $1.50 loss per share. Does that increase my basis on my $13 shares to $14.50? Also, what is the time frame to avoid the wash sale situation?

I realize the tax consequences are not substantial at this stage but I am trying to understand the basic principles. The "take your losses early and let your gains ride" advice really helps. Thanks in advance. I really appreciate the wisdom on this board.


See IRS Pub. 550, Investment Income and Expense, www.irs.gov/pub/irs-pdf/p550.pdf for full details. Basically, you add the loss per share from the sold shares to the same number of shares in the earliest block you purchased (that you still own) within 30 days before to 30 days after the date of sale.

In your case, lets assume you bought 200 shares at $13 on 4/19, 200 shares at $14 on 5/1 and 200 shares at $15 on 5/10. You want to sell 200 shares at $13.50. If you sell the "5/10" shares, you will have a loss of $300 ($1.50/share). If you sell before 5/20, you will adjust the basis of the 4/19 shares so that they will have a cost basis of $14.50. If you sell after 5/20 but before 6/2, you will adjust the cost basis of the 5/1 shares so that they will have a cost basis of $15.50. If you sell after 6/1, you can take the loss on your 2004 tax return and do not adjust the basis of the other two blocks of stock, PROVIDED you do not purchase any additional shares of the company in the 30 days following the sale.

Read through the examples in the IRS Publication. If you still have questions, come back and ask and we'll provide more guidance.

Ira
Print the post  

Announcements

Disclaimer:
In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.