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Strategies & Market Trends : Income Taxes and Record Keeping ( tax )
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To: Investor2 who wrote (2208)5/14/1999 11:18:00 PM
From: Gorak Shep  Read Replies (1) of 5810
 
The sale at $25 is a wash sale, so I can't write off the $1 loss and I don't put it on my Schedule D. However, the IRS receives a 1099 saying I sold 100 shares of xyz for $25, which raises the audit alarm.

What did I do wrong?

First, Nelson's answer to you is WRONG.

The first sale is a wash sale but this does NOT mean you do not put it on Sched D.

You DO put it on Sched D for the tax year you sold it. Then, on the very next line, you write Wash Sale in the Description column and add the loss back in as a gain in the Gain column thus offsetting the loss for that year. This entry will make your totals match the 1099.

When you finally sell the second position, you add the loss ($1, not $2.50, per share) to your basis.
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