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

To: Sword who wrote (816)	4/17/1999 8:17:00 PM
From: Gorak Shep	Read Replies (2) \| Respond to of 1383

NONE of them qualify as wash sales if the position closes before Dec. 31st and you don't buy it again in January. Sword, you are right in a pragmatic sense but dead wrong in the technical/legal sense. Technically you need to report ALL wash sales even if they have no material impact on the final tax due. There is nothing in the IRS regs that says you can ignore the wash sale if its effect is countered before the end of the year. In practice, it is certainly not worthwhile for the IRS to audit someone merely for a reporting issue that has no material impact. Thus some take the approach you suggest. It would be advisable to attach a note explaining what you are doing if you take this approach demonstrating why each issue has no wash consequences. But it should be clear to people that this is NOT what the IRS requires. Also, your remark should read: if the position closes before Dec. 31st and you don't buy it again in the next 30 days rather than in January since if you close the position earlier than Dec 31 you can buy it back before the end of January.

To: Sword who wrote (816)	4/18/1999 1:33:00 AM
From: Nelson Chang	Read Replies (1) \| Respond to of 1383

>>>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.<<< This is not entirely true either. Lets say I bought stock a month ago. Sell at a loss now. Buy back tomorrow with the intent of holding it for the "long-term" (ie. 1 year). I did not buy the stock back after Dec. 31. The loss is still the result of a wash sale and cannot be reported as a loss. It must be reported as raising the cost basis of the 2nd purchase. But yes I also understand your point. Which is why I opted for trader status and mark-to-market accounting in which it doesn't matter either way. Saved me the headache, and allowed for certain trading expenses to be deducted.