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Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: Madhur who wrote (2279)	8/2/1999 2:42:00 PM
From: Kaye Thomas	Read Replies (2) \| Respond to of 5810

Madhur's statement (the wash sale rule anyway only really matters when you are re-entering wash sale positions between Jan 1 and 30th of the next tax year) is incorrect, or at least, is correct only if you add some unstated assumptions. A wash sale occurring in the middle of the year can be just a significant as a wash sale in which the replacement stock is purchased in the first 30 days of January. If you trade completely out of a stock before the end of the year and don't repurchase in the first 30 days of January, you'll recover the loss that was disallowed by a wash sale that occurred earlier in the year. Even then, it's possible that the wash sale rule could have turned a short-term loss into a long-term loss. Of course this is unlikely to be of concern to a day trader. Let's walk through an example. You bought XYZ in November 1998 and sold at a loss in June 1999. Then you bought back again within 30 days, creating a wash sale. Your basis for the replacement stock includes the disallowed loss, and your holding period includes the time you held the old stock. Point number one is that if you still hold the replacement stock at the end of 1999, the wash sale rule has disallowed your loss for the year. Point number two is that if you sell the replacement stock at a loss in December 1999, you'll report a long-term loss, which is often less favorable than a short-term loss. Modesty prevents me from mentioning where you would find the most complete discussion of the wash sale rule. If you're able to guess which web site to look at, check the guide to capital gains and losses. Kaye Thomas, author Fairmark Press Tax Guide for Investors fairmark.com