OK, well I found the answer, but am not real clear on the calculations. Here is the answer:
"Where loss on a sale of stock is disallowed under the wash sale rule because similar securities were acquired within 30 days before or after the sale, the holding period for the newly acquired stock or securities includes the holding period for the stock which was sold."
OK, so that is good news. Sounds easy enough...add the first holding period to the second, but....
"The holding period of securities acquired in a wash sale must be computed on the basis of calendar months rather than number of days basis. Thus a full calendar month is computed from a date in one month to the numerically corresponding date in the succeeding month -- less one. Where the period includes fractional parts of a month, the following rules apply:
If the period less than a calendar month. Where such period covers parts of two calendar months, the stock is held for the fraction of a month computed by taking as the numerator the total number of days in the period (counting from the date acquired through the date sold -- less one) and as the denominator the number of days in the calendar month immediately preceding the month in which the period ends. If the fractional period is fully within a calendar month, the numerator is obtained by counting from the date acquired to the date sold -- less one and the denominator is the number of days in the calendar month.
If the period is of one or more calendar months plus a fraction of a calendar month. First compute the full calendar month or months. The fraction remaining is then computed by taking as the numerator the full number of days remaining and as the denominator the number of days in the calendar month immediately preceding the month in which the period ends.
illustration: A security acquired Jan. 15 and sold Feb. 14, is held for 30/31 of a month. If bought Feb. 14 and sold Mar. 13, it is held for 27/28 of a month.
illustration: A security acquired Jan. 2 and sold Jan. 30 is held for 28/31 of a month.
illustration: A security acquired on Nov. 15, and sold on Feb. 14, is held for 2 30/31 months. It includes two full calendar months from Nov. 15, to Jan. 15. The numerator of the remaining fractional period is 30 (16 days in Jan. plus 14 days in Feb) and the denominator is 31 (the days in Jan)."
All of the above quoted material was obtained from RIA's tax disk. As we have a paid subscription and since I am not being compensated in any way by posting it here, I don't think quoting it directly violates anything. Simply a lot easier than retyping it in my own words and saying the same thing.
Now the part I don't understand is that the calendar months calculated above seems to only apply to the subsequent purchase (speaks to stock acquired in a wash sale) and not the original purchase. However, I cannot believe that is the case and believe that you probably must calculate the months for the first holding, skip the days no stock was held and then calculate the second holding by months and then add the two together. If you get more than 18, it is long term.
At least that is my read. I checked several different sources and none gave a concrete example....even the revenue rulings issued on the topic.
-Scott |
