Wash Trades and Taxes

B

bob2007

Would like some insights on wash trades and taxes.

My accountant was saying I need to stop wash trades.

I thought wash trades only deal with December trades and capital gains ramifications for 30 days?
But does it apply to all other months of the year?

Scenario 1

I buy apple at 140, sell 130.
Lose 10.
I buy apple 130 sell 140.
Make 10.

Since I can't claim losses of 10.
I will make 10 - taxes?

If I am trading in and out of a stock 10 times a day... I suppose I could be quite screwed by this situation... not being about to claim the losses and getting hit on the gains?

Is this article accurate?


Robin Hood Trader needs to pay $800, 000 in Taxes on 45k profits.
https://www.forbes.com/sites/shahar...der-may-face-800000-tax-bill/?sh=1088434f67c7
 
Last edited:
bob2007 said:
I buy apple at 140, sell 130.
Lose 10.
I buy apple 130 sell 140.
Make 10.

Since I can't claim losses of 10.
I will make 10 - taxes?
More...

Assuming you didn't wait 30 days after the first sell and the tax year didn't end between the first sell, second buy and second sell, I think the tax consequences would be something like:
upload_2021-8-2_16-12-46.png


So there would be no taxes due.
 
Last edited:
bob2007 said:
Would like some insights on wash trades and taxes.

My accountant was saying I need to stop wash trades.

I thought wash trades only deal with December trades and capital gains ramifications for 30 days?
But does it apply to all other months of the year?

Scenario 1

I buy apple at 140, sell 130.
Lose 10.
I buy apple 130 sell 140.
Make 10.

Since I can't claim losses of 10.
I will make 10 - taxes?

If I am trading in and out of a stock 10 times a day... I suppose I could be quite screwed by this situation... not being about to claim the losses and getting hit on the gains?

Is this article accurate?


Robin Hood Trader needs to pay $800, 000 in Taxes on 45k profits.
https://www.forbes.com/sites/shahar...der-may-face-800000-tax-bill/?sh=1088434f67c7
More...
If you stop trading in Dec or Jan, assuming a Jan 1 to Dec 31 fiscal year the wash sale rule will have no tax implications for you. On a related note, most CPAs know FA about trading taxes. Fire yours and go with green trader tax or someone else who knows this space.
 
bob2007 said:
I buy apple at 140, sell 130.
Lose 10.
I buy apple 130 sell 140.
Make 10.

Since I can't claim losses of 10.
I will make 10 - taxes?
More...

No. The $10 loss on your first trade is "added to the cost basis" of your subsequent trade.

That is... on the 2nd trade, you paid $130... for accounting and taxes, the loss on the first trade is added to the price paid on the second. That is, for tax purposes... and though you paid $130, the price paid for tax calculation is "stepped up" so that it's accounted for as though you paid $140... and thus, "break even on the two trades".

IMV... "Wash Trade" rules are cumbersome at best and stupid at worst... should be repealed. Provide little of anything other than potentially shifting taxes from this year to next. Not only that, they are very easy to avoid.
 
Last edited:
bob2007 said:
Would like some insights on wash trades and taxes.

My accountant was saying I need to stop wash trades.

I thought wash trades only deal with December trades and capital gains ramifications for 30 days?
But does it apply to all other months of the year?

Scenario 1

I buy apple at 140, sell 130.
Lose 10.
I buy apple 130 sell 140.
Make 10.

Since I can't claim losses of 10.
I will make 10 - taxes?

If I am trading in and out of a stock 10 times a day... I suppose I could be quite screwed by this situation... not being about to claim the losses and getting hit on the gains?

Is this article accurate?


Robin Hood Trader needs to pay $800, 000 in Taxes on 45k profits.
https://www.forbes.com/sites/shahar...der-may-face-800000-tax-bill/?sh=1088434f67c7
More...


When your accountant said you have to stop wash sales were they referring to your previous tax year 2020 or your current trading year now in 2021??
 
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