Schedule D

L

lauralb

Hi,
If there is anyone with proper knowledge regarding the wash sales rules which apply to schedule D I would really appreciate your help.
I received my schedule D from 2 sources and the wash sale rule was applied differently therefore I decided to take the time to do some research and get some advice.

I have the following situation:

Buy 1000 shares of xyz stock @ $5.00 (for $5,000.00) on 2/2/2010
Buy 1000 shares of xyz stock @ $4.50 (for $4,500.00) on 2/2/2010
Sell 2000 shares of xyz stock @ $4.75 (for $9,500.00) on 2/2/2010

The first 1000 shares have a loss of $250.00 and should be reported as wash sales, in other words will prevent me to report the loss. But should not the loss be added to the basis of the replacement shares, which are the second 1000 shares?
Thank you for your time.
 
I'm pretty sure you're correct, but my memory of these issues is a bit foggy as all of mine are handled by software now. I found that even the commercial software sometimes disagrees on the interpretation of the rules in certain complex cases (not that the case you pose is complex).

The best resource I found on wash sales was this accountant's Web site:

http://www.fairmark.com/capgain/wash/index.htm/
 
Quote from lauralb:


Buy 1000 shares of xyz stock @ $5.00 (for $5,000.00) on 2/2/2010
Buy 1000 shares of xyz stock @ $4.50 (for $4,500.00) on 2/2/2010
Sell 2000 shares of xyz stock @ $4.75 (for $9,500.00) on 2/2/2010

The first 1000 shares have a loss of $250.00 and should be reported as wash sales, in other words will prevent me to report the loss.
More...

I don't think you had a wash sale based on the above information. Your 2000 shares of xyz stock has a basis of $9500 - commissions. (1000 @$5.00 and 1000 @4.50). You sold all of it at $9500. You have a loss of 0 before commission. Counting commissions (1 buy, 1 buy and 1 sell) and SEC fees, you have a small loss. e.g. $50.

Did you buy back xyz stock within 30 days from 2/2/2010? If not, you don't have a wash sale.
 
Occam, thank you for the reply. The link submitted is not available, can you repost it?
Bolimomo, The first 1000 shares have been replacement by the second 1000 shares
 
Quote from lauralb:


Bolimomo, The first 1000 shares have been replacement by the second 1000 shares
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I am sorry lauralb. It seems you are not telling the whole scenario. How was the first 1000 shares been replaced by second 1000 shares?

You bought 1000 shares.
Then you bought another 1000 shares.

So you had a total of 2000 shares at that moment.

Then you sold all 2000 shares of it. On the same day.

How could the second 1000 shares be a "replacement"? Have I misunderstood something?
 
Sorry for the misinformation.
I did some research on the internet where I came across an article that mentioned about separate purchases and my example falls under this one. In this scenario the IRS will content that the wash sale rule will apply in this situation.
 
Quote from lauralb:

I did some research on the internet where I came across an article that mentioned about separate purchases and my example falls under this one. In this scenario the IRS will content that the wash sale rule will apply in this situation.
More...

Separate purchases, via the same broker or different brokers, does not automatically cause wash sale.

A wash sale (not to be confused with a wash trade) is a sale of a security (stock, bonds, options) at a loss and repurchasing the same or substantially identical stock soon afterwards.
More...

The key question to ask is:
Did you repurchase the same stock soon afterwards? (Soon being 30 days).
 
Quote from lauralb:

Sorry for the misinformation.
I did some research on the internet where I came across an article that mentioned about separate purchases and my example falls under this one. In this scenario the IRS will content that the wash sale rule will apply in this situation.
More...

I the buy/sell took place intra-day, don't bother, just report the total amount for the day.
Anyway, if you have a lot of trades, better use a software. I have been using this for the last 3 years to generate my schedule D (it actually generates schedule D that you just attach to your return:
http://www.vbssol.com/
It's only $50 and let's you enter unlimited trades.
 
Bolimomo, now I think I got confused. Can you please define wash trade?
To answer your question, the sale of new and old shares were from the same broker.

Telozo, thank you for your info.
 
Quote from lauralb:
Buy 1000 shares of xyz stock @ $5.00 (for $5,000.00) on 2/2/2010
Buy 1000 shares of xyz stock @ $4.50 (for $4,500.00) on 2/2/2010
Sell 2000 shares of xyz stock @ $4.75 (for $9,500.00) on 2/2/2010
More...
Your basis is $9,500 + commissions
Your sale price is $9,500 - commissions

Assuming you paid no trading fees to your broker, your loss is the exchange fee levied on the sale of all shares. Everyone pays exchange fees.
Assuming you paid commissions, your loss is all commissions & fees paid on the purchase & sale of all shares.
If you repurchase xyz stock within 30 days, your basis on your new xyz shares is price x quantity + commissions + the loss computed above.

If you bought 1000 shares on 2/2 and 1000 shares on 2/3, the purchase date is "various".
To avoid making things complicated, I sell all shares at once.
 
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