Is this a wash sale?

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spefactor
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Is this a wash sale?

Post by spefactor » Mon May 11, 2020 2:19 pm

Is this scenario a wash sale? Or can I take it as a short-term capital loss?

4/30, no position in XYZ CORP
5/1, buy 100 XYZ CORP shares at $100
5/2, buy 100 XYZ CORP shares at $99
5/15, sell 200 XYZ CORP shares at $80

Apologies if this is a dumb question, I read the wiki as well as did many an-internet search and could not find how this case would be handled.

Thanks.

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firebirdparts
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Re: Is this a wash sale?

Post by firebirdparts » Mon May 11, 2020 2:22 pm

No, that's taking a loss. Wash sales is the government calling out a fake loss. If you sell, that, you genuinely lost the money.

put another way, they don't care how fast you lose the money.
A fool and your money are soon partners

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iceport
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Re: Is this a wash sale?

Post by iceport » Mon May 11, 2020 2:33 pm

firebirdparts wrote:
Mon May 11, 2020 2:22 pm
No, that's taking a loss. Wash sales is the government calling out a fake loss. If you sell, that, you genuinely lost the money.

put another way, they don't care how fast you lose the money.
Exactly.

Or another way to look at it is that it's not the selling at a loss that causes a wash sale, it's the replacing of that losing asset — within the 61-day wash sale period — that creates the wash sale. If you don't replace the losing asset you sold, it's not a wash sale and the loss is allowed.

See here: Wash Sales and Replacement Stock
"Discipline matters more than allocation.” ─William Bernstein

rkhusky
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Re: Is this a wash sale?

Post by rkhusky » Mon May 11, 2020 3:28 pm

spefactor wrote:
Mon May 11, 2020 2:19 pm
Is this scenario a wash sale? Or can I take it as a short-term capital loss?

4/30, no position in XYZ CORP
5/1, buy 100 XYZ CORP shares at $100
5/2, buy 100 XYZ CORP shares at $99
5/15, sell 200 XYZ CORP shares at $80
You would be able to take a short-term capital loss of $3,900 ($2,000 + $1,900), as long as you don't buy XYZ before June 15.

Your brokerage might throw a temporary wash sale, but it would have no real effect. It depends on how the brokerage's computers are programmed. Since you are selling two lots of shares, once the computer sells the first lot (5/1), the computer will notice the second lot (5/2), which is currently unsold, and flag a wash sale, disallowing the loss, and adjusting the basis of the second lot to $119/sh ($99 + $20; if the second lot is sold first, the basis of the first lot would also be adjusted to $119 = $100 + $19). Then, a few microseconds later, the computer will sell the second lot, and you will recover your full loss ($3,900 = 100 * $39/sh).

Or the computers might be programmed to flag both lots as sold, before doing the wash sale analysis. In which case, no wash sale flagged. If this happens, I don't think anyone would recommend that you manually enter a wash sale on your tax forms.

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LadyGeek
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Re: Is this a wash sale?

Post by LadyGeek » Mon May 11, 2020 6:16 pm

This thread is now in the Personal Finance (Not Investing) forum (taxes).

The wiki has some background info: Wash sale
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lstone19
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Re: Is this a wash sale?

Post by lstone19 » Mon May 11, 2020 6:31 pm

I think a good shortcut way to look at this if you close out your position in a stock and don't own it at all for the next 30 days, there is not a wash sale no matter how soon before the sale you bought it or any other trades you made involving the stock. Closing out a position lets you claim both the immediate loss as well as any previously deferred losses due to earlier wash sales.

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Stinky
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Re: Is this a wash sale?

Post by Stinky » Tue May 12, 2020 4:30 am

spefactor wrote:
Mon May 11, 2020 2:19 pm
Is this scenario a wash sale? Or can I take it as a short-term capital loss?

4/30, no position in XYZ CORP
5/1, buy 100 XYZ CORP shares at $100
5/2, buy 100 XYZ CORP shares at $99
5/15, sell 200 XYZ CORP shares at $80
Hopefully this is a hypothetical, and you didn’t lose 20% in a position in a single stock in two weeks.
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Housedoc
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Location: Alabama

Re: Is this a wash sale?

Post by Housedoc » Tue May 12, 2020 6:22 am

Not a wash but definitely a trip to the cleaners. Hopefully question is not in the category of Asking for a friend!

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