Robinhood daytrader owes 800K to IRS on a profit of 45K

[murray t turtle]

.. because he was ignorant of wash sale rules. I wonder - will the IRS take pity on the guy?

https://notthebee.com/article/robin...fhmVyz4R8V9AlCajNUPnbMcAn81MSWxeY9AdXk8NMtNSA

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Thats why as they say, ''a good CPA will pay for himself or herself in a minute'' Could have had a Roth/back door Roth also.
Actually with the commissions + fine print on annuities/he[insurance co] may still do well this year....................................,

 

[swingtrader123]

Huh? That's completely wrong.

https://www.investopedia.com/terms/w/washsalerule.asp

Wash-Sale Rule Example
For example, you buy 100 shares of XYZ tech stock on November 1 for $10,000. On December 15, the value of the 100 shares has declined to $7,000, so you sell the entire position to realize a capital loss of $3,000 for tax deduction purposes. On December 27 of the same year, you repurchase the 100 shares of XYZ tech stock back again to reestablish your position in the stock. The initial loss will be not be allowed to be counted as a tax loss since the security was repurchased within the limited time interval.

If you continue reading you will see

"For example, consider the case of an investor who purchased 100 shares of Microsoft for $33, sold the shares at $30, and within 30 days bought 100 shares at $32. In this case, while the loss of $300 would be disallowed by the IRS because of the wash-sale rule, it can be added to the $3,200 cost of the new purchase. The new cost basis, therefore, becomes $3,500 for the 100 shares that were purchased the second
time, or $35 per share."

You don't lose the loss deduction. You have to manually readjust your cost basis.

 

[terr]

If you continue reading you will see

You're right, I missed that. Have I been misunderstanding the wash sale rule all my life?

What is the point of it if it is just added to the cost basis of the new purchase? The result is basically the same. Why bother having a wash sale rule?

 

[virtusa]

You're right, I missed that. Have I been misunderstanding the wash sale rule all my life?

What is the point of it if it is just added to the cost basis of the new purchase? The result is basically the same. Why bother having a wash sale rule?

Ask the IRS.

 

[trend2009]

You're right, I missed that. Have I been misunderstanding the wash sale rule all my life?

What is the point of it if it is just added to the cost basis of the new purchase? The result is basically the same. Why bother having a wash sale rule?

irs wants quick money

 

[athlonmank8]

The 1099-B only lists "proceeds" from stock sales, hence the initial huge tax bill. It is the trader/taxpayers responsibility to fill out the schedule D, and establish a true cost basis for all the trades, which should largely correct the problem.

Good point

 

[athlonmank8]

when I filed tax I did not calculate wash sale. I only reported gain that year. I am active day trader. No position holds over a few days. Irs would not be interested looking at my each trade. If your position holds many months, then take a loss before the year end, then buy back,your purpose is clearly avoiding loss. Wash sale comes into play in this case

Same. I agree

 

[deepfkvalue]

How does wash sale rule work with options? Does different strike and expiry date count as different security?

 

[athlonmank8]

How does wash sale rule work with options? Does different strike and expiry date count as different security?

That's a grey area

 

[comagnum]

That article is grossly inaccurate & far from reality, you don't owe the IRS for you trading loses & I don't see any way they could dig very deep into his profits.

Wash sales are a minor ding at worst in harvesting loses & at worst a minor ding on your profits - unless maybe you are trading the same stocks across an IRA & taxed acct.