Tax question re: day trading in/out same stock

Quote from godbyka:

I have a problem. May be someone know smth about it. My friend and I are trading together and our accounts are registed in one broker. This month he had big looses and to prevent his accout from closing I tried to help him. We traded stocks with big spread, we were in and out at the same price, so my looses and his gains were equal. We got th message about wash trade. What is this, and may they take money away?
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I strongly suggest that you not ever bring up what you did, you'll have much more than than taxes to worry about.

FWIW,

Don
 
Quote from Don Bright:

I strongly suggest that you not ever bring up what you did, you'll have much more than than taxes to worry about.

FWIW,

Don
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At least the two buddies will have nice matching striped outfits at the pen...certainly not the smartest thing to do/advertise!

surdo
 
Like the OP, I day trade a pool of stocks very frequently (pairs trading where one side usually incurs a loss) and I'm having trouble with details of the wash sale rule. I understand that although mark-to-market would avoid this, it's too late to file the request for this year.

I could keep trading the stocks with wash sale issues but then it becomes a paperwork nightmare carrying the losses forward (I trade heavily).

I think that my only alternative at this point is to avoid trading the stocks with losses for 30 days after the loss so I need to set up a "Can't trade until (date)" list. So my question is...

Suppose on Dec. 1st I realize a $500 loss on XYZ. Choice A is wait 30 days before trading it again. Choice B is that I trade XYZ again, deferring the $500 loss until the 2nd trade is closed. Suppose on Dec. 10th I trade XYZ again and realize a $600 gain. Since the gain exceeds the loss, the net gain is $100. Is the wash sale negated and can I continue trading XYZ w/o any add'l concern for that initial loss on Dec 1st?

Suppose in the above example I only made $400 back on Dec 10th and the net is a loss of $100 carried forward. Does my 30 day "no trade" extend from Dec 1st or Dec 10th?

TIA for any info and if you know of a web source that details the applicable governmentese in understandable Anglish, I'd appreciate it :)
 
Quote from spindr0:
Suppose on Dec. 1st I realize a $500 loss on XYZ. Choice A is wait 30 days before trading it again. Choice B is that I trade XYZ again, deferring the $500 loss until the 2nd trade is closed. Suppose on Dec. 10th I trade XYZ again and realize a $600 gain. Since the gain exceeds the loss, the net gain is $100. Is the wash sale negated and can I continue trading XYZ w/o any add'l concern for that initial loss on Dec 1st?
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I don't think anybody (including the IRS) knows for sure how this stuff should be handled, because the rules were not created for day traders. In your example, I would not defer the $500 loss. Note that if you decide to wait 30 days before trading xyz again, some or all of that thirty days can be in January.
 
I'm curious. I use mark to market but this talk of wash sales has me thinking.

S0 long as you close out everything by year end is there any difference?

For example:

Say you buy 1000 RIMM at 44.00, sell at 43.70...loss -300

Then you buy 1000 RIMM at 44.00 again and sell at 43.70..loss -300

Then you buy 1000 RIMM at 44.00 and sell at 45.50..profit +1500.

So your net gain is +900.00.

How would the wash rule change this?
 
if you make enough money to pay a accountant to do your taxes, just give your account your entire yearly statement.



Quote from jonnyz1245:

lets say I have made 50+ round trips in a month of the same two stocks. I trade lots of 1000 shares and each trade is about 100K. I have been scalping and am so far in the green about 15K. Looking at daytrading for dummies today in the chapter on taxes it said "in the extreme case if you move in and out of a stock over and over the irs can tax you on your total gain and not net"

the example they gave was say yopu made 300K in profits and 200K in losses, your net is 100K but they can tax you on the 300K.

what is your experience with this. I am worried now that I have lost on a couple trades...

#'s below are taken from my fidelity tax page and is current

Realized Gain/Realized Loss/Disallowed Loss/
$34,265.30 -$109,274.46 $90,289.62

Net Gain/Loss
$15,280.46

after reading that I am all worried now that I am in over my head. I have traded 4 million in stocks and thought that I would only pay tax on my true net gain but this has me all confused.

will someone with some expertise please help clear this up and clarify for me please. I will stop trading tomorrow if I am getting walloped on gains I have given back.

Thanks
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Quote from Deadwood:

I'm curious. I use mark to market but this talk of wash sales has me thinking.

S0 long as you close out everything by year end is there any difference?

For example:

Say you buy 1000 RIMM at 44.00, sell at 43.70...loss -300

Then you buy 1000 RIMM at 44.00 again and sell at 43.70..loss -300

Then you buy 1000 RIMM at 44.00 and sell at 45.50..profit +1500.

So your net gain is +900.00.

How would the wash rule change this?
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If you purchase RIMM in the first 30 days of the 2009 (assuming you traded it in Dec 08) the -600 is deferred to your 2009 taxes. Therefore, your 2008 taxes will show a net gain of +1,500.
 
Thanks that makes sense.

So really its just those dec/jan trades that the wash rule effects for a daytrader?

I just never heard anyone talk about this. Everyone I know is probably mark to market I suppose.
 
don't listen to anyone here not qualified to give tax advice.

you could be pay too less or too much tax than you should.



Quote from OffTilt:

If you purchase RIMM in the first 30 days of the 2009 (assuming you traded it in Dec 08) the -600 is deferred to your 2009 taxes. Therefore, your 2008 taxes will show a net gain of +1,500.
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