Wash Sale Question - Buy/Sell same lot

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Wash Sale Question - Buy/Sell same lot

Postby Doc » Fri May 10, 2013 12:27 pm

Buy 200 shares of xyz today at $10.

Sell 100 shares tomorrow at $8.

Do I have a STCL of $200 or 100 shares of xyz at $12?

This could be a nightmare for those of us who are trying to use a short term bond fund instead of a MM fund.

I had a similar type occurrence at Vg several weeks ago except I bought more shares which created the wash sale. There was no question that this was a wash sale transaction. I wound up with three different costs on a single mutual fund transaction. :annoyed

(Edit, corrected typo in title - "Buy" not "But". :oops: )
Last edited by Doc on Fri May 10, 2013 8:26 pm, edited 1 time in total.
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Re: Wash Sale Question - But/Sell same lot

Postby Phineas J. Whoopee » Fri May 10, 2013 12:43 pm

Doc wrote:Buy 200 shares of xyz today at $10.

Sell 100 shares tomorrow at $8.

Do I have a STCL of $200 or 100 shares of xyz at $12?

This could be a nightmare for those of us who are trying to use a short term bond fund instead of a MM fund.

I had a similar type occurrence at Vg several weeks ago except I bought more shares which created the wash sale. There was no question that this was a wash sale transaction. I wound up with three different costs on a single mutual fund transaction. :annoyed

Hi Doc,

I had thought the answer was simple and obvious, but by sending me to IRS publication 550 to prove it you've again shown your particular talent for picking up on logical weaknesses.

I would have said they can't be replacement shares if they're never replaced. On the other hand, the IRS says:

A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

1. Buy substantially identical stock or securities,

2. Acquire substantially identical stock or securities in a fully taxable trade,

3. Acquire a contract or option to buy substantially identical stock or securities, or

4. Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA.

http://www.irs.gov/publications/p550/ch04.html#en_US_2012_publink100010601


The situation you've described sounds like it must fall into the first of the four. I should think by now there would be case law to provide guidance, but I sure didn't find the answer to your question in 550!

PJW
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Re: Wash Sale Question - But/Sell same lot

Postby Wagnerjb » Fri May 10, 2013 1:00 pm

I don't see how this isn't a legitimate short term loss. The OP didn't say he already had some of XYZ before he purchased the 200 lots at $10. If he already owned some shares of XYZ, the question is a different one....and I am only addressing the situation where he didn't own any of it already.

Best wishes.
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Re: Wash Sale Question - But/Sell same lot

Postby Two Headed Mule » Fri May 10, 2013 1:48 pm

Assuming the shares sold were from the same lot purchased, and assuming there were no additional purchases within the wash-sale window, the Service has clarified that you have a short term capital loss rather than a wash sale. See Rev Rul 56-602
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Re: Wash Sale Question - But/Sell same lot

Postby Calm Man » Fri May 10, 2013 2:20 pm

I am reading this as buying security X and selling it at a loss sometime after. It could be 1 second, 1 day or 1 week. This must be allowable as a taxable loss I would think. Now, buying it back within 30 days makes it a wash sale.
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Re: Wash Sale Question - But/Sell same lot

Postby momar » Fri May 10, 2013 2:37 pm

They word it like that so you cant buy replacement shares and then immediately turn around and sell your loss. But I think what you did is fine.
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Re: Wash Sale Question - But/Sell same lot

Postby Doc » Fri May 10, 2013 8:37 pm

Two Headed Mule wrote:Assuming the shares sold were from the same lot purchased, and assuming there were no additional purchases within the wash-sale window, the Service has clarified that you have a short term capital loss rather than a wash sale. See Rev Rul 56-602


OK. The rule makes sense (especially for the IRS).

http://washsales.org/2010/02/03/8/

Anybody want to guess how the IT people at the various financial institutions handle the situation. :D

Thanks Mule
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