Disallowed loss reporting question

heliface · Mar 22, 2019

Hello,

There seems to be a disconnect between how much I think I made trading in 2018 vs what my broker is reporting on the consolidated 1099 form. I’m wondering if I’m missing something.

For the sake of anonymity here are some example numbers:

My personally calculated 2018 profits: $5,000

And now from the consolidated 1099:
Proceeds: $30,000
Cost Basis $26,000
Market Discount: $0
Wash Sale Loss Disallowed: $1,000

Realized Gain(or Loss): $4,000

So the broker is saying I made 1k less than I had thought, but wondering if I need to add the “wash sale loss disallowed” number to that in order to arrive at the expected 5k profit.

Any advice would be very helpful. Thanks in advance.

-heli

smallfil · Mar 22, 2019

What you have on your 1099-B form is what is reported to the IRS. If you bought the same stock you sold within 30 days, that is considered a wash sale. A wash sale disallows any losses claimed if you buy the stock back within 30 days. So, in this case, your realized gain is $4000.

heliface · Mar 22, 2019

smallfil said:
What you have on your 1099-B form is what is reported to the IRS. If you bought the same stock you sold within 30 days, that is considered a wash sale. A wash sale disallows any losses claimed if you buy the stock back within 30 days. So, in this case, your realized gain is $4000.

Thank you for your reply. Are you sure it’s not $5000? If it is $4000, then the wash sale doesn’t appear to even factor into the situation.

Ayn Rand · Mar 22, 2019

You did not mention if you were trading options or not. With options wash sale is subjective. Regardless if only $4,000 in profits were reported to the IRS and you think you made $5,000 - good. You have to pay capital gains on less profit. More for you.

heliface · Mar 22, 2019

Ayn Rand said:
You did not mention if you were trading options or not. With options wash sale is subjective. Regardless if only $4,000 in profits were reported to the IRS and you think you made $5,000 - good. You have to pay capital gains on less profit. More for you.

No options, just short term stocks. Thanks for the heads up!

gkishot · Mar 22, 2019

Just go with the broker.

LS1Z28 · Mar 22, 2019

https://www.marketwatch.com/story/understanding-the-wash-sale-rules-2015-03-02
The only good news about wash-sales is that your disallowed loss doesn’t just go up in smoke. Instead, it gets added to the basis of the replacement securities. When you sell them, your disallowed loss effectively reduces your gain or increases your loss on that transaction.

Do you still own the shares?

heliface · Mar 22, 2019

LS1Z28 said:
https://www.marketwatch.com/story/understanding-the-wash-sale-rules-2015-03-02
The only good news about wash-sales is that your disallowed loss doesn’t just go up in smoke. Instead, it gets added to the basis of the replacement securities. When you sell them, your disallowed loss effectively reduces your gain or increases your loss on that transaction.

Do you still own the shares?

Nope, all sold within 2018

LS1Z28 · Mar 22, 2019

heliface said:
Nope, all sold within 2018

You should be fine then. You can't deduct the loss, but it's added to the cost basis of the secondary position you took. So you would've received credit for it whenever you sold the position. At least that's my understanding of how the rule works.

sprstpd · Mar 23, 2019

heliface said:
Hello,

There seems to be a disconnect between how much I think I made trading in 2018 vs what my broker is reporting on the consolidated 1099 form. I’m wondering if I’m missing something.

For the sake of anonymity here are some example numbers:

My personally calculated 2018 profits: $5,000

And now from the consolidated 1099:
Proceeds: $30,000
Cost Basis $26,000
Market Discount: $0
Wash Sale Loss Disallowed: $1,000

Realized Gain(or Loss): $4,000

So the broker is saying I made 1k less than I had thought, but wondering if I need to add the “wash sale loss disallowed” number to that in order to arrive at the expected 5k profit.

Any advice would be very helpful. Thanks in advance.

-heli

Either your calculation is incorrect or your broker's calculation is incorrect. Figure out why there is a difference and you'll have a better of understanding how to proceed.

If you were flat for a month over the year boundary on the position you have a wash sale in, then you can essentially ignore the wash sale in your calculation.