FUEGO
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Nov 13, 2007
- Messages
- 7,746
I've been reading up on wash sales in Pub 550, Schedule D instructions and fairmark.com. I think I understand the wash sale rule, but let me see if I'm getting it.
Example 1:
I buy 1 share of XYZ on 1/1/2008 for $100. I sell 1 sh XYZ on 1/15/2008 for $90. No wash sale here; I have a short term capital loss of $10.
Example 2:
I have owned 1 share of XYZ for over two years with a cost basis of $100. I sell 1 sh XYZ on 1/15/2008 for $90. No wash sale yet. Then I buy 1 sh XYZ on 2/1/2008 for $95. This purchase on 2/1/2008 converts the 1/15/2008 transaction into a wash sale. The $10 capital loss realized on 1/15/2008 cannot be deducted due to the wash sale, but the $10 loss is added to the cost basis of the 1 sh XYZ bot 2/1/2008 for a total cost basis on that share of $105.
========
Just reading the text of Sched D instructions and Pub 550 makes it sounds like Example 1 would be a wash sale, since you purchase shares within 30 days before/after the sale resulting in a loss. However the fairmark sources seem to indicate that the shares bought, thereby triggering the wash sale, must be to "replace" the shares you sold.
From Fairmark.com:
"In general, the wash sale rule prevents you from reporting a loss on the sale of stock if you acquired substantially identical stock on the same day as the sale, or within 30 days before or after that day. But the wash sale rule doesn't apply if the stock you bought wasn't replacement stock."
Fairmark is right, right?
Example 1:
I buy 1 share of XYZ on 1/1/2008 for $100. I sell 1 sh XYZ on 1/15/2008 for $90. No wash sale here; I have a short term capital loss of $10.
Example 2:
I have owned 1 share of XYZ for over two years with a cost basis of $100. I sell 1 sh XYZ on 1/15/2008 for $90. No wash sale yet. Then I buy 1 sh XYZ on 2/1/2008 for $95. This purchase on 2/1/2008 converts the 1/15/2008 transaction into a wash sale. The $10 capital loss realized on 1/15/2008 cannot be deducted due to the wash sale, but the $10 loss is added to the cost basis of the 1 sh XYZ bot 2/1/2008 for a total cost basis on that share of $105.
========
Just reading the text of Sched D instructions and Pub 550 makes it sounds like Example 1 would be a wash sale, since you purchase shares within 30 days before/after the sale resulting in a loss. However the fairmark sources seem to indicate that the shares bought, thereby triggering the wash sale, must be to "replace" the shares you sold.
From Fairmark.com:
"In general, the wash sale rule prevents you from reporting a loss on the sale of stock if you acquired substantially identical stock on the same day as the sale, or within 30 days before or after that day. But the wash sale rule doesn't apply if the stock you bought wasn't replacement stock."
Fairmark is right, right?