Partial wash sale

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
justsomeguy2018
Posts: 1509
Joined: Wed Oct 03, 2018 8:11 pm

Partial wash sale

Post by justsomeguy2018 »

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.
Katietsu
Posts: 7662
Joined: Sun Sep 22, 2013 1:48 am

Re: Partial wash sale

Post by Katietsu »

justsomeguy2018 wrote: Thu Oct 06, 2022 8:02 am Or is it 90 shares only that can count for the loss?
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.
User avatar
cchrissyy
Posts: 2339
Joined: Fri May 05, 2017 10:35 pm
Location: SF bay area

Re: Partial wash sale

Post by cchrissyy »

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.
60-20-20 us-intl-bond
livesoft
Posts: 85971
Joined: Thu Mar 01, 2007 7:00 pm

Re: Partial wash sale

Post by livesoft »

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!
Wiki This signature message sponsored by sscritic: Learn to fish.
Topic Author
justsomeguy2018
Posts: 1509
Joined: Wed Oct 03, 2018 8:11 pm

Re: Partial wash sale

Post by justsomeguy2018 »

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!
Ok I'm admittedly a little confused, and I'll explain why a little later below.

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?
User avatar
cchrissyy
Posts: 2339
Joined: Fri May 05, 2017 10:35 pm
Location: SF bay area

Re: Partial wash sale

Post by cchrissyy »

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?
yup

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
rkhusky
Posts: 17654
Joined: Thu Aug 18, 2011 8:09 pm

Re: Partial wash sale

Post by rkhusky »

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?
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.

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).
placeholder
Posts: 8375
Joined: Tue Aug 06, 2013 12:43 pm

Re: Partial wash sale

Post by placeholder »

As noted it's important to avoid having the wash sale in an ira because the regulations say that this loss is not recoverable.
Post Reply