If you sell 100 shares of something for a loss of $2,000, then 15 days later you somehow inadvertently purchase 10 more shares at $15 each ($150 total), does that mean you can only count $1850 dollars for TLH purposes? Or is it 90 shares only that can count for the loss? Or is none of the loss allowed since you bought some replacement shares.
This scenario/numbers are just hypotheticals, not somehing that really happened to me.
Partial wash sale
Re: Partial wash sale
This one. The 10 shares most recently purchased will have a basis going forward of that includes the disallowed loss as well as the amount actually paid for them.justsomeguy2018 wrote: ↑Thu Oct 06, 2022 8:02 am Or is it 90 shares only that can count for the loss?
Re: Partial wash sale
the loss is about the number of shares not the dollars
you have
90 shares with a deductible loss
10 shares you sold and can't deduct the loss
10 shares you bought have that loss added to their cost accounting.
so when you sell the 10 new shares, they will have more loss / less gain than if none of this had taken place, and you will have experienced the entire deductible loss for those original 100 shares.
you have
90 shares with a deductible loss
10 shares you sold and can't deduct the loss
10 shares you bought have that loss added to their cost accounting.
so when you sell the 10 new shares, they will have more loss / less gain than if none of this had taken place, and you will have experienced the entire deductible loss for those original 100 shares.
60-20-20 us-intl-bond
Re: Partial wash sale
And to fill this in:
After the cost basis of the 10 new shares is adjusted upwards by $20 a share it will look like you bought 10 new shares for $35 a share instead of just $15 a share. So if the shares are currently selling for $15 a share, then your shares have a loss already!
After the cost basis of the 10 new shares is adjusted upwards by $20 a share it will look like you bought 10 new shares for $35 a share instead of just $15 a share. So if the shares are currently selling for $15 a share, then your shares have a loss already!
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Re: Partial wash sale
Ok I'm admittedly a little confused, and I'll explain why a little later below.livesoft wrote: ↑Thu Oct 06, 2022 1:03 pm And to fill this in:
After the cost basis of the 10 new shares is adjusted upwards by $20 a share it will look like you bought 10 new shares for $35 a share instead of just $15 a share. So if the shares are currently selling for $15 a share, then your shares have a loss already!
Buy 100 shares @ $50/share = $5,000
Sell 100 shares @ $30/share = $3,000 ($2,000 loss)
Buy 10 shares @ $15/share (accidental wash sale)
Allowed Loss = 90 shares at $20/loss a share = ($1800) loss claimed on taxes (say,25% rate, $450 tax savings)
New Shares Cost Basis = $15 + $20 = $35/share accounting cost basis
New Shares go up $20 to $35/share and are sold at $35/share
$35 share accounting cost basis - $35 share sell price = $0 net capital gain, $0 in tax owed/harvested
So what I am confused about is, if this is correct, didn't the wash sale basically get me out of owing what would have been taxes on a $200 capital gain (10 x $20) from the wash sale?
Alternative scenario/question:
New Shares Cost Basis = $15 + $20 = $35/share accounting cost basis
New Shares stay at $15/share and are sold at $15/share
$35 share accounting cost basis - $15 share sell price = ($200 net capital loss, accounting wise)
Can I then deduct this $200 loss from taxes? And if so, didn't I once again basically eliminate the wash sale penalty?
Re: Partial wash sale
yupSo what I am confused about is, if this is correct, didn't the wash sale basically get me out of owing what would have been taxes on a $200 capital gain (10 x $20) from the wash sale?
the wash sale rule isn't a penalty.
it's just adjusting the cost basis of those new shares and so you get the benefit when you sell them.
you can do it the minute you notice the "mistake" or it can be years later. it's fine.
60-20-20 us-intl-bond
Re: Partial wash sale
If the replacement shares are acquired in a taxable account, the only penalty is that the loss is deferred until you sell the replacement shares.justsomeguy2018 wrote: ↑Thu Oct 06, 2022 1:53 pm Can I then deduct this $200 loss from taxes? And if so, didn't I once again basically eliminate the wash sale penalty?
On the other hand, if the replacement shares are acquired in a tax-advantaged account, the loss is permanently disallowed (taxes in tax-advantaged accounts do not depend gains or losses, and so adjusting the cost basis is meaningless there).
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Re: Partial wash sale
As noted it's important to avoid having the wash sale in an ira because the regulations say that this loss is not recoverable.