My Wash Sale Rule scenario question?

Question

Ok, so here's my scenario, and I am not sure if wash sale rule applies to all my losing trades, or some, or none. Here's the scenario: I entered into a long position of company XX on 4/10, which was closed on 5/09 for a loss of $110. I entered a similar long position with XX on 4/11 (one day after entering the previous position) and exited that on 8/17 for a loss of $549. I took up a short position on the same stock XX, half of which I covered on 9/19 for a profit, and the rest I still have opened. Can I claim the above two losses of $110 and $549 as writeoff , or does wash sale rule prohibit me from doing so since I have a similar holding opened less than a month after selling my long position. Any insight into this situation will be appreciated. The more detailed, the better. Thanks Byu1980, here are the details on my scenario again: Loss a> 100 Long XX dateOfPurchase 4/10 date Of Sale 5/9 Net Loss $110 Loss b> 200 Long XX dateOfPurchase 4/11 date Of Sale 8/17 net loss $549 profit a> 300 Short XX dateOfShortSell 9/07 date of Cover 9/19 (only 150 of 300 covered) net profit $256 *150 Short XX from 9/19 still open in 2007. Quesstion: How does Loss a and Loss b are affected, if at all by wash sale rule.

Answer 1

For starters longs wash longs a shorts wash shorts.

100 long xx 4/10 sale 5/9 loss 110 wash sale because of 4/11 purchase.

The cost basis of 100 long xx 4/11 is adjusted by 110 and holding period becomes 4/10 to 8/17.

A note is added with filed taxes indicating the cost basis adjustment.

The other 100 loss is not modified or affected.

This is assuming the shorts were entered into after the closing of the longs.

You said the 150 short xx still open in 2007. I hope this is a typo.

If you had a short position in one account and opened longs in another account you created a straddle and would have to look at form 1256.

Answer 2

You didn't indicate the date of entering the short sale, or the number of shares involved in any of your transactions. If that date was 8/17 or earlier (i.e., you still held some of the stock you bought on 4/11), then a special rule regarding wash sales in combination with short sales comes into play. The following example from IRS Publication 550 may help you. Short sales. The wash sale rules apply to a loss realized on a short sale if you sell, or enter into another short sale of, substantially identical stock or securities within a period beginning 30 days before the date the short sale is complete and ending 30 days after that date. For purposes of the wash sale rules, a short sale is considered complete on the date the short sale is entered into, if: 1) On that date, you own stock or securities identical to those sold short (or by that date you enter into a contract or option to acquire that stock or those securities), and 2) You later deliver the stock or securities to close the short sale. Otherwise, a short sale is not considered complete until the property is delivered to close the sale. This treatment also applies to losses from the sale, exchange, or termination of a securities futures contract to sell. Example. On June 2, you buy 100 shares of stock for $1,000. You sell short 100 shares of the stock for $750 on October 6. On October 7, you buy 100 shares of the same stock for $750. You close the short sale on November 17 by delivering the shares bought on June 2. You cannot deduct the $250 loss ($1,000 - $750) because the date of entering into the short sale (October 6) is considered the date the sale is complete for wash sale purposes and you bought substantially identical stock within 30 days from that date. To summarize, if your short sale date is on or before 8/17, then the short sale is considered complete on the date it occurred (likely to the extent of a comparable number of shares), and the short sale date will govern for purposes of measuring the 30 days before and 30 days after rule. But if the short sale occurred after you disposed of the second long position, then the short sale date does not govern because the short sale is not considered complete until you buy back the shares.

Answer 3

extra_37 is real. A wash sale basically exists in case you purchase the same inventory interior the wanted time-body after promoting at a loss - then you definately can not deduct the loss out of your modern taxes, it rolls into the idea of the newly-offered inventory. see you later as you do not repurchase XYZ inventory, there is not any wash sale.