Thanks Colin,
I know you have answered wash sales questions many times, and I've tried to keep up with all of them- even thought I understood them. However I still have two questions, one very basic, and one of concern to at least those active traders who don't get TRADER status.
A) From IRS Pub 550: (1995- latest one I have)
"A wash sale occurs when you sell stock or securities at a loss and within 30 days before or after the sale you:
1) Buy substantially identical stock or securities......"
I buy XYZ and hold it for 3 days, selling it at a loss. What I bought was of course EXACTLY identical to what I sold, and was bought less than 30 days before I sold it. Is this a wash sale, or does this rule apply only to subsequent blocks (i.e., purchased after my original PURCHASE) of substantially identical securities? (I think I understand the stuff about smaller/larger subsequent blocks, options, etc.)
Hope that one was easy. Now for the second
B) Loss and gain on the same day.
"Loss from a wash sale of one block of stock or securities cannot be used to reduce gains on identical blocks sold the same day."
A couple of scenarios:
a) I buy 100 shares of XYZ at $50. Next day the price has dropped and I cost average with another 100 shares at $46, so my average cost is now $48. Three days later I sell 200 shares at $49.
First block is a wash sale, right?
Do I pay tax on my net gain of 200($49-$48) = $200, or on 100($49-$46) = $300 because the wash sale is disqualified from my basis by the same day sale rule?
b) A SOES style daytrader plays 1000 share blocks of INTC all day long, making 10 separate full-turn buy/sell trades. Say 7 of them are losses totalling $2000, and 3 are winners totalling $2000 (including the commissions in all cases). His net gain for the day is zero. Does he pay no tax, or tax on his $2000 on the win side? Does it matter if he has TRADER status?
Thanks in advance,
Dan |
