No, no. You have left out one very important point!
The whole idea of wash sales is to prevent a trader from selling at a loss before the end of the year, only to buy the stock back again right after Dec 31, thereby locking in a capital loss even though the trader intends to keep the stock. The IRS doesn't like you messing with their head like that! They don't want you to claim a capital loss by flipping stock just for tax reporting purposes.
You said: If you want to claim your loss as a deduction, you need to avoid purchasing the same stock during the wash sale period. For a sale on March 31, the wash sale period includes all of March and April.
Yes, but if you sell at a loss, buy back and then sell again before the end of the year, you don't have to claim any wash sales at all. It makes absolutely no difference on your tax bill! Daytraders have hundreds, sometimes thousands of trades like this. NONE of them qualify as wash sales if the position closes before Dec. 31st and you don't buy it again in January. This is all you have to watch for.
One thing is certain: the IRS has not concocted some stupid rule that would prevent you from ever claiming a loss on a stock that you sell on March 1st for $2,500 at a $500 loss, buy back on March 2nd for $2500 again and then sell on March 3rd for $2,500. You can claim a $500 capital loss for that first transaction on your schedule D and not report any wash sale. If you want to report the wash sale for the first transaction, you would then adjust your cost basis on the second trade to $3,000. Why bother? The IRS recognizes the same amount of capital loss for you either way.
-Sword |
