IB Smart routing and trade execution - tax perspective & wash sale rule

B

blink18

Let's say you enter market BUY order for 400 MSFT with SMART routing:
Details:
09:45:11, 100 @ ISLAND, comission: $0.77
09:45:11, 200 @ DARK, comission: $1.54
09:45:11, 100 @ NYSE, comission: $0.77
Total BUY: 400

And then you enter market SELL order for 400 MSFT with SMART routing:
Details:
09:45:12, 200 @ IBKRATS, comission: $0.77
09:45:12, 200 @ DARK, cimission: $0.77
Total SELL: 400

Is this 1 second trade considered as one trade or multiple trades from tax perspective? What about wash sale rule?
 
My understanding is that as long as it is the same or similar stock and the transaction is conducted on the same day it is counted as one trade.

In your case above with and in and out it would be counted as one day trade. The exchange you trade should not be a factor.

You can stagger the buys - example 9:45 10:00 10:30 and that is still considered one in.

I am not positive of how you count staggered sells, where you sell at different times on the same day? However, I suspect the same principle applies. As long as everything is sold on the same day, it is counted as 1 out.
 
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I never buy AND sell on the same day, but I made a few one second trades for test purposes. So you're saying this is just one 400 BUY and one 400 SELL, and that's it?
 
Quick answer - yes

Actually I thought you were asking about day trades for the pattern day trade rule. The trades you made would count as 1 day trade.

As far as wash sale it would not apply in this case. You have to rebuy the stock within 30 days for wash sale to kick in.

Wash sale - when do you realize a loss. You will eventually get the loss but it may not be immediate.

Buy asset
Sell at a loss

Buy similar asset within 30 days.
Can not realize the loss above until you sell this position.
The loss in the first step is incorporated into the basis of the 2nd buy and will be captured when you finally sell the 2nd buy asset.

Example

1st buy
Buy for $10
Sell for $5

$5 dollar loss

Within 30 days if you but the stock again you can not realize the $5 loss until you resell.

2nd buy
Buy for $10. Basis is $10 + $5 (loss) = $15
If you then sell for $20 your profit for tax purposes is not $10 but on $5

You never lose the loss. Recognition is just delayed.

At the end of the year when you get a 1099 from your broker it may contain erroneous wash sales. This is especially true if you do a lot of options trades.

You either have to have a good idea how wash sales work or talk to a tax pro if you suspect a lot of your trades are being mismarked as wash sales which will increase your tax liability.

Although a bit vague here is an article on the topic - https://www.hvst.com/posts/the-dang...using-a-1099-b-form-from-your-broker-EJaTKJZj
 
blink18 said:
Let's say you enter market BUY order for 400 MSFT with SMART routing:
Details:
09:45:11, 100 @ ISLAND, comission: $0.77
09:45:11, 200 @ DARK, comission: $1.54
09:45:11, 100 @ NYSE, comission: $0.77
Total BUY: 400

And then you enter market SELL order for 400 MSFT with SMART routing:
Details:
09:45:12, 200 @ IBKRATS, comission: $0.77
09:45:12, 200 @ DARK, cimission: $0.77
Total SELL: 400

Is this 1 second trade considered as one trade or multiple trades from tax perspective? What about wash sale rule?
More...
I think you're getting wrapped around the axel on something that's irrelevant. If you started out flat and ended flat then you made one round trip transaction. A wash sale doesn't even start until you subsequently buy the same or substantially the same security, so you're one step away from that now. What exchange the sale happened on is never relevant for any reason related to the wash sale rule.

Pro tip, if you stop trading the security for all of Dec or all of Jan the wash sale rule is a moot point for tax purposes anyway.

And you forgot the 2 at the end of your handle:D
 
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