Wash sale rule on multiple transactions

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simpler
Posts: 1
Joined: Wed Mar 25, 2020 7:34 pm

Wash sale rule on multiple transactions

Post by simpler » Wed Mar 25, 2020 7:47 pm

I did four transactions, with the intention of tax loss harvesting.

1. 02/28: Bought 100 shares of IVV
2. 02/28: Bought 100 shares of IVV
3. 03/17: Sold 100 shares of IVV
4. 03/17: Sold 100 shares of IVV

I don't have any other transactions related to IVV this year.

Will 3 and 4 be treated as wash sales? Since transaction 1 or 2 can be considered as the "replacement" share purchase of transaction 3 or 4, which is within 30 days.
I know if I did buy and sell 200 shares in a single transaction, it will definitely not be treated as wash sales.
My brokerage is Fidelity and usually it displays a blue "W" icon for transactions which trigger wash sales, however so far I don't see the the icon showing up for the above transactions.

nalor511
Posts: 582
Joined: Mon Jul 27, 2015 1:00 am

Re: Wash sale rule on multiple transactions

Post by nalor511 » Wed Mar 25, 2020 8:17 pm

I don't know. I guess you'll find out though... Post back when you do :happy

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iceport
Posts: 4417
Joined: Sat Apr 07, 2007 4:29 pm

Re: Wash sale rule on multiple transactions

Post by iceport » Wed Mar 25, 2020 9:22 pm

simpler wrote:
Wed Mar 25, 2020 7:47 pm
I did four transactions, with the intention of tax loss harvesting.

1. 02/28: Bought 100 shares of IVV
2. 02/28: Bought 100 shares of IVV
3. 03/17: Sold 100 shares of IVV
4. 03/17: Sold 100 shares of IVV

I don't have any other transactions related to IVV this year.

Will 3 and 4 be treated as wash sales? Since transaction 1 or 2 can be considered as the "replacement" share purchase of transaction 3 or 4, which is within 30 days.
I know if I did buy and sell 200 shares in a single transaction, it will definitely not be treated as wash sales.
My brokerage is Fidelity and usually it displays a blue "W" icon for transactions which trigger wash sales, however so far I don't see the the icon showing up for the above transactions.
It seems to me that you created one wash sale in Transaction 3. You are right, that if Transactions 1 and 2 were combined, there would not be a wash sale. But since you bought an ETF in two distinct transactions, not only was the timing different, the cost per share was probably different. Similarly, if you had combined Transactions 3 and 4 there would probably be no wash sale, because there would be no replacement shares left.

Transaction 4 is not a wash sale, because there are no replacement shares left.

However, you're still fine. When you created the wash sale in Trans. 3, the loss is disallowed but the amount of the loss gets added to the cost basis of the remaining shares. Then in Trans. 4, the loss is increased due to the upward adjustment of the cost basis, and the previously disallowed loss is realized and you can claim it.

That's how I see it. I have no idea why Fidelity would not flag one wash sale here.

If you're new to wash sales, the half hour it takes to read through the first five of the articles here will be time well spent:

https://fairmark.com/investment-taxatio ... gain/wash/
"Discipline matters more than allocation.” ─William Bernstein

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grabiner
Advisory Board
Posts: 26079
Joined: Tue Feb 20, 2007 11:58 pm
Location: Columbia, MD

Re: Wash sale rule on multiple transactions

Post by grabiner » Wed Mar 25, 2020 10:08 pm

Welcome to the forum!
simpler wrote:
Wed Mar 25, 2020 7:47 pm
I did four transactions, with the intention of tax loss harvesting.

1. 02/28: Bought 100 shares of IVV
2. 02/28: Bought 100 shares of IVV
3. 03/17: Sold 100 shares of IVV
4. 03/17: Sold 100 shares of IVV

I don't have any other transactions related to IVV this year.

Will 3 and 4 be treated as wash sales? Since transaction 1 or 2 can be considered as the "replacement" share purchase of transaction 3 or 4, which is within 30 days.
Transaction 3 will probably be reported by your brokerage as an irrelevant wash sale. When you had made only transaction 3 (selling lot 1), you might have a wash sale because you purchased lot 2. Then, when you made transaction 4, you got back the full benefit.

If you bought at $300 and sold at $250, then after transaction 3, the loss would be disallowed as a wash, but your basis on lot 2 (the replacement shares) would be increased to $350. Thus, when you made transaction 4, your capital loss on that sale would be $10,000, which is the correct total for the two sales.

Several people have reported this phenomenon even when the two sales were simultaneous, because the brokerage's computer had to break the sale into two parts, one for each lot.
Wiki David Grabiner

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