wash sale on options

eaglefeather said:
the stock and the call are not the same security. Is this a joke?
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No joke. Here's what it says in IRS Publication 550:

You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.


A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:

  1. Buy substantially identical stock or securities,
  2. Acquire substantially identical stock or securities in a fully taxable trade,
  3. Acquire a contract or option to buy substantially identical stock or securities, or
  4. Acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.
If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.

For the source of this text, see page 56:

https://www.irs.gov/pub/irs-prior/p550--2019.pdf

BMK
 
I am not an accountant or a lawyer... but wash sale restriction deals with when (not if) you recognize the loss. If you reestablish a position, it adjusts your cost basis.

The other alternative is to elect MTM treatment.
 
temnik said:
but wash sale restriction deals with when (not if) you recognize the loss.
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That is absolutely correct. When you have a wash sale, it does not mean that you can never deduct the loss. As you stated, it changes your basis, and the loss gets "rolled" into the next sale.

The original post raised a question about trading in December, and whether certain transactions would have the effect of disallowing certain losses that occurred earlier in the year. And the answer to that question was yes. A wash sale can have the effect of postponing a loss into the following calendar year.

BMK
 
I want to know if a put purchased AFTER the buy of stock within 30 days but sold for a loss counts as a wash sale. 40 shares of stock, 1 put.
 
IronFist said:
What about when you buy one contract and sell another, one expires for a loss, one for a gain. Is that a wash sale?
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In your example you simply netted out the proceeds?

If I do all the trades in the same account or related accounts that I own, Schwab automatically determines for me the wash sale rule and acts accordingly in their statement/record.

Options are fast moving and 30 days is forever so I never really worry about tax when I trade.
 
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