Colin or anyone,
Ok, my turn with a twister.
This year I held 400 sh of WDC at broker A with a paper loss.
As it happens these shares are long term, but that's not
part of the question (or at most a minor part).
At broker B, without thinking too much about it, I bought
500 sh of WDC, held them for a few days, and sold at a small
profit (1/4, I think).
At the time, knowing that if I took a LOSS it
would be a wash sale (of 400 of the 500 shares), I had in my head
that this wasn't a wash because of the small profit. No loss,
no wash, right? Well ...
Now I'm not so sure. First, I didn't designate the lot(s)
of the 500 shares sold. I could gripe about web trades and
designated lots, but the truth is I didn't think about it,
either. So, by the FIFO rule, I sold the original 400 at
a loss, plus 100 of the second 500 for a small gain. In
that case, the original 400 sale portion is definitely
a wash.
The question is, what is the real tax situation? My
preference is to report a gain on the full 500 sh swing trade at
broker B and let broker A's shares sit (reportingwise).
Do I really have that flexibility?
In a related but independent question, does a sequence
like buy X shares at broker B then sell X shares at broker
B (with no other shares of the same equity at broker B)
constitute a reasonable case for designated shares? I'd
like to know the answer to this one independent of
wash sale consideration.
Supposing for argument that I HAD designated the shares
at broker B in the sale at broker B (suppose I actually
had a sale confirmation supporting this, to make the
question clear). In THAT case, could I elect to report
a gain on the 500 share swing trade and avoid a wash?
Or does it make no difference insofar as the wash rule
is concerned? I'd like to know the answer to this question
too, independent of my current situation.
Finally, a more practical question. The swing gain with
commissions is around $95 (actually that's for the whole
500 shares, for the 400 in question it's ... hell with it).
It appears my worst case scenario, if I simply report this
swing as a gain, is moving $95 gain
from this year to some future year under an audit. To
be sure rates could change, but it seems at worst I will
pay the gain later and get it back with interest earlier
(a net gain for me at constant tax rates), or, at extreme
worst if there's a very late audit, I can't get it back
this year and pay tax on it twice. I just can't see
getting put in jail or paying a penalty for OVERPAYing
my 98 taxes by 30 bucks (especially since the call is
hardly crystal clear either way). Plus interest, of course,
which is louse nuts on mouse nuts. The final question is:
Am I missing something in this analysis?
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