>>I thought capital losses were used to offset the gains, and that the net
loss were deductible up to $3000 a year with anything more carried
over to the following year. Am I correct to think so?
Yes, this is correct (although you offset first within
capital class, now long-term, mid-term, short-term).
And you can use FIFO accounting or sell designated shares of
your holdings to determine gain/loss on a sale (designating
shares has its own set of rules; it also depends on the
asset class--eg, mutual funds have different rules again).
BUT the wash sale rule has nothing to do with this. The
wash sale rule simply says that if you exit a position
and reestablish it (or establish
a "substantially identical" position) within the 61-day
window, a loss on the position is deferred until you close
the reestablished position.
There is one way I can think of that designating shares
(either FIFO or otherwise) could affect a wash sale. If
you were to designate shares of the position you exit
that showed a GAIN, then the wash sale rule doesn't
apply, and you would have to pay tax on the gain.
Example: XYZ is at 15; I own 100 shares at 10 and another
100 shares at 20. If I sell 100 XYZ and then buy 100
within 30 days (or had bought a new 100 within the past
30 days or on the same day) then:
If I designate that I sold the shares I own at 20,
there is a wash and my loss is deferred until I sell
the 100 I acquired within the 61-day window.
If I designate that I sold the share I own at 10, there
is a gain which I must report and no wash sale.
To designate sale of a particular lot, you have to instruct
your broker in writing in a timely way which shares you're
selling and be able to document that. Some brokers will
put it on the ticket. If you don't do that, the IRS will
accept FIFO (and probably force you to use it).
The other flags were (a) that you said option losses and
commissions were DEDUCTABLE when what they are are CAPITAL
LOSSES, and (b) there were enough things suspect in you
post from this taxman that it would be prudent to get
different advice.
BTW, I am STRICTLY an amateur who does his own taxes.
There are professionals posting here who know far better
than I. These are strictly my own opinions and impressions.
Best of luck,
Spots |
