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Ira has been rocking in answering my questions so far. Major kudos!

One last (i hope) question:

I participate in an ESPP and sold some of the company stock at a loss in 2001, a variety of long term loss and short term loss and a variety of lots at different amounts of loss.

I plan on setting up a separate line item for the lots which I will carry forward the loss on. I plan on counting up the shares I bought via the ESPP one month before the sale and one month after. Then I plan on creating the separate line item for enough lots to add up to those one month pre/post purchases and defer the loss on those.

How should I best determine which lots should be allocated to the wash sale rule? highest/lowest loss? short v. long term loss?

any other thoughts? thanks a million!!
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I'll take a stab at this, but I'm going to lay out the solution as I would do it, not as you seem to want to do things.

You don't have much flexibility here.

1) You purchased ESPP shares over time.

2) You sold some shares in 2001. If you specified which shares to sell, and received written confirmation of your request, you can calculate the profit or loss on those specific lots. If not, you must use the earliest purchased shares in your calculations.

3) After step 2, you have a tentative loss on one or more lots of shares. You begin by looking back 30 days from the date of sale. Did you purchase any shares on that day? If no, move forward one day and repeat. If yes, the newly purchased shares must have their cost basis adjusted. Take the loss on an equal number of shares from the earliest "loss" lot and add that loss to the cost basis of the newly purchased shares. Set the purchase date of the newly purchased shares to the purchase date of the "loss" lot. Set the loss on the sale of these "loss" shares to $0. If there are more shares in the newly purchased lot, continue with the next oldest "loss" lot until you run out of newly purchased shares. If there are more shares in the "loss" lot, move forward one day and repeat step 3 until you get to the day which is 30 days after the sale date.

4) After you run out of "loss" shares, or newly purchased shares in the 30 day window on either side of the sale date, you are finished allocating wash sales. If you still have a loss remaining from your sale, you can claim it on the appropriate line(s) of Schedule D. If you have allocated all of the loss to other lots of stock which you still own, you enter the sales on Schedule D, and either adjust the cost basis to yield $0 gain/loss, or, enter the transactions as they occurred and on the next line enter "wash sale" and put a gain in column (f) which offsets the loss.

If this isn't clear, please ask again.


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Take the loss on an equal number of shares from the earliest "loss" lot... </i<

that's what i needed to know, Ira. Thank You!!
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