Wash Sales

H

Hambone

Last year, when I was preparing my taxes, I called and asked questions to Keen tax service about wash sales. I was basically told not to worry about it as long as all positions were liquidated before year end. Last year I did not file as a 'Trader'. This year I intend to file as a Trader, but with that, I increase the probability of a tax audit. This increases my concern as to whether last years advice is correct or not.

The first seven months of the year I daytraded securities continuously and did so with the same stocks time and time again, (probably 30 or 40 stock on a regular basis). The last part of the year I switched to e-mini futures, (which is where I have had the most difficult time in generating a profit).

My question is, do I have to go through some sort of elaborate process in calculating the actual loss, (I had a gross loss for the year), via wash sales rules??? I did not elect the MTM.
 
Quote from RAH2153:

Last year, when I was preparing my taxes, I called and asked questions to Keen tax service about wash sales. I was basically told not to worry about it as long as all positions were liquidated before year end.


The first seven months of the year I daytraded securities continuously and did so with the same stocks time and time again, (probably 30 or 40 stock on a regular basis). The last part of the year I switched to e-mini futures, (which is where I have had the most difficult time in generating a profit).

My question is, do I have to go through some sort of elaborate process in calculating the actual loss, (I had a gross loss for the year), via wash sales rules??? I did not elect the MTM.
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As far as your end of year advice you received; THis is not true or absolute. YOu may have indeed liquidated a given security or all positions by year end say mid or beginning Decemberish. But if at some point in Jan, you jumped back in for a trade on that same security, the wash sale rule still applies here.

I am not sure elaborate is the correct word, more like a tedious pain in the butt. But yes indeed, since you did not elect trader classification tax status for this given period, you will have to account for and carry any or all wash sales as applicable. Many times indeed, depending on how this swings, wash sales can be the difference between being net positive or negative for a given tax year. That is why December is such a critical month for non-classified traders. You must know exactly where you are by Thanksgiving for the year to allow for any potential adjustments you need to make or X-factors.
 
After looking at my trades in December 2001 and January 2002, I see that I did very little trading in those 2 months as I was in the process of liquidating one losing account and refinancing a new account with a new broker. So I didn't trade any stocks in November/December of 2001 that I traded in January 2002. Therefore I should be OK.
 
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