understand wash sale

H

happy trading

i know this was probably discussed here many times but please bear with me and help me understand.
right now i do not currently day trade. before i possibly embark on such a hard journey i want to clarrify exactly what happens if i only trade one stock such as the spy and after 100 trades in one day, i am at break even. to make things simple let us say on 50 of the trades i lose 1 dollar for a loss of 50. and on the next 50 trades i make 1 dollar a trade, for a gain of 50. now i am back to break even. do i owe money on tazes because i gained or simce i am back to break even i am scott free?
if i do not owe any taxes what would be a scenario that it seems like is possible that even though overall i did not net any money and maybe even lost money i would still owe taxes?
 
If you trade often, you can declare yourself as a trader, not an investor. So your trading gain and loss offset. Do not recall what the procedure is, but it is not hard.
 
happy trading said:
i know this was probably discussed here many times but please bear with me and help me understand.
right now i do not currently day trade. before i possibly embark on such a hard journey i want to clarrify exactly what happens if i only trade one stock such as the spy and after 100 trades in one day, i am at break even. to make things simple let us say on 50 of the trades i lose 1 dollar for a loss of 50. and on the next 50 trades i make 1 dollar a trade, for a gain of 50. now i am back to break even. do i owe money on tazes because i gained or simce i am back to break even i am scott free?
if i do not owe any taxes what would be a scenario that it seems like is possible that even though overall i did not net any money and maybe even lost money i would still owe taxes?
More...

If you would pay tax on every trade irrespective of the outcome, then there would be double tax issue, since your loss is someone's else profit and clearly he has to pay tax on his profits.
 
RedSun said:
If you trade often, you can declare yourself as a trader, not an investor. So your trading gain and loss offset. Do not recall what the procedure is, but it is not hard.
More...
The requirements are quite stringent so no, it's hard.
 
happy trading said:
i know this was probably discussed here many times but please bear with me and help me understand.
right now i do not currently day trade. before i possibly embark on such a hard journey i want to clarrify exactly what happens if i only trade one stock such as the spy and after 100 trades in one day, i am at break even. to make things simple let us say on 50 of the trades i lose 1 dollar for a loss of 50. and on the next 50 trades i make 1 dollar a trade, for a gain of 50. now i am back to break even. do i owe money on tazes because i gained or simce i am back to break even i am scott free?
if i do not owe any taxes what would be a scenario that it seems like is possible that even though overall i did not net any money and maybe even lost money i would still owe taxes?
More...
If I were you I'd look online for the answer because the answers you will get here are going to be anything but clear.
 
happy trading said:
i know this was probably discussed here many times but please bear with me and help me understand.
right now i do not currently day trade. before i possibly embark on such a hard journey i want to clarrify exactly what happens if i only trade one stock such as the spy and after 100 trades in one day, i am at break even. to make things simple let us say on 50 of the trades i lose 1 dollar for a loss of 50. and on the next 50 trades i make 1 dollar a trade, for a gain of 50. now i am back to break even. do i owe money on tazes because i gained or simce i am back to break even i am scott free?
if i do not owe any taxes what would be a scenario that it seems like is possible that even though overall i did not net any money and maybe even lost money i would still owe taxes?
More...

The basic intent of the IRS wash-sale rule is to discourage investors from selling losing stocks at the end of the year in order to book a loss, then immediately buy back the same, or a similar investment. This will be an issue for you if you sell an instrument in December, then buy it back within 30 days in January. So just find a way to work around that 30 day period, or be prepared in the unlikely event that the IRS questions it.
 
LindQ is spot. Trade SPY as you wish Jan to late December. Then Jan 1st for 30+ days shift to something else such as QQQ. This will keep all you SPY trades in one year, with the 30+ day gap into the next year. You will not have a wash sales crossing the tax years, meaning no buy/sell of the same product in less 30 days crossing the tax year. Wash sales within a tax year do not impact your tax. It just treats a series of short term (<30-day) transactions like it was one transaction.
 
You must log in or register to reply here.
Back
Top