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Strategies & Market Trends : IRS, Tax related strategies--Traders -- Ignore unavailable to you. Want to Upgrade?

To: Nelson Chang who wrote (814)	4/17/1999 7:09:00 PM
From: Sword	Read Replies (3) \| Respond to of 1383

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

To: Nelson Chang who wrote (814)	4/18/1999 11:13:00 AM
From: William Ford	Read Replies (1) \| Respond to of 1383

Thank you, Nelson, but what if... I trade stock XYZ 50 times during 1999 and sell it on December 1st thereby closing out all my positions on XYZ, not buying it again in 2000. Are there any wash sales? I am beginning to get the idea that you have no wash sales if you trade a stock as many times as you want, close it out at the end of the year without buying it back for 30 days even into the next year. Is this your understanding? Bill

To: Nelson Chang who wrote (814)	4/18/1999 5:50:00 PM
From: Nandu	Read Replies (3) \| Respond to of 1383

<<The wash sale period for any sale at a loss consists of 61 days: the day of the sale, the 30 days before the sale and the 30 days after the sale. (These are calendar days, not trading days. Count carefully!) 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.>> By this logic, if I bought 1000 shares of XYZ on Mar 2nd, sold it at a profit on Mar 5th, then bought 1000 shares of ZYX again on Mar 20th, then sold the second lot for a loss on Mar 31st, I have to report the Mar 31st sale as a wash sale and increase the basis for the Mar 2nd purchase? What if I bought 1000 shares again on Apr 1st. Do I increase the basis for the Mar 2nd purchase or the Apr 1st purchase?