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Strategies & Market Trends : Options
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To: rkral who wrote (6389)4/15/2000 4:40:00 PM
From: Scrumpy  Read Replies (1) of 8096
 
Wash sale rule according to TurboTax...(confirmation anyone?)

"The wash sale occurs when you sell stock at a loss and, within 30 days before or after the sale, you buy substantially identical stock."

"...Losses from wash sales are not deductible. Gains are taxable."

"...A wash sale can also occur with contracts or options to buy or sell stock...."

"... Wash sale rules also apply to short sales. They do not apply to commodity futures contracts or foreign currencies."

NOW HERE'S THE KICKER

TurboTax help goes on to say "The rules are designed to prevent taxpayers from selling stock to create a tax loss while STILL ACTUALLY HOLDING A PROTECTIVE POSITION IN THE STOCK (which most daytraders, I assume, are not). So even if you engage in a wash sale unintentionally or for sound economic, non-tax reasons, the rules still apply. "

What this implies (if TurboTax is accurate) is that if you end up with no positions at the end of the year, you shouldn't be subject to the wash sale rule.

I sure hope the last paragraph came from the IRS, and not Intuit.

Any confirmation on this?

... the IRS adds this

If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities. The result is your basis in the new stock or securities. The effect of this adjustment is to postpone the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities begins on the same day as the holding period of the stock or securities sold.
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