anybody know the 'wash' rule well?

[TranceNation]

so is it true that if you dont hold the stock at the end of the year, you can ignore the wash rule throughout that year?

 

[kherman]

Originally posted by: TranceNation
so is it true that if you dont hold the stock at the end of the year, you can ignore the wash rule throughout that year?

Not sure what you are asking. I am confused. Pleas e add moredetail.

 

[aphex]

Originally posted by: kherman

Originally posted by: TranceNation
so is it true that if you dont hold the stock at the end of the year, you can ignore the wash rule throughout that year?

Not sure what you are asking. I am confused. Pleas e add moredetail.

Spacing problems today?

 

[ScrapSilicon]

Originally posted by: aphexII

Originally posted by: kherman

Originally posted by: TranceNation
so is it true that if you dont hold the stock at the end of the year, you can ignore the wash rule throughout that year?

Not sure what you are asking. I am confused. Pleas e add moredetail.

Spacing problems today?

yes o opz

 

[DonaldC]

Originally posted by: TranceNation
so is it true that if you dont hold the stock at the end of the year, you can ignore the wash rule throughout that year?

That's a new one on me. AFAIK if you sell at a loss and repurchase the same stock within 30 days part of the loss is non-deductible. 31 DEC has nothing to do with it.

 

[TranceNation]

well i was reading several sites like http://www.traderstatus.com/washsale.htm
which says the following:

One unofficial "trick" to avoid some or all of the annual headache is to stop trading and holding any and all positions for a 31 consecutive day period that includes December 31st. If you do this at both the beginning and the end of any given calendar year, generally, you can just ignore the wash sale rule with relative impunity. (this isn't really a "trick", it's just "in the math" of counting days pursuant to the rule)

 

[TranceNation]

Also, this site too http://www.fool.com/taxes/2000/taxes001006.htm .

But, and this is a very big "but," the wash sale rules really become moot if you close out your entire position in the stock prior to the end of the year... and then stay out of the stock for the required 30-day period before or after the date of the loss sale.

Let's look at Larry again. He certainly has a wash sale in the example above. But, let's say that Larry tires of his position in ABC Co. and sells his 500 shares on December 20th of the same year for $4,000. Larry's adjusted basis in the shares is $10,200 based on his wash sale computations, and his overall loss would amount to $6,200.

But, if you break down the two separate "buy" and "sell" transactions, you see that Larry generated a loss of $7,000 on the first transaction, and a gain of $800 on the second transaction -- amounting to a "net" loss of $6,200. This, amazingly, is the same amount of loss Larry computes when taking the wash sale and basis adjustment rules into account. So, since Larry closed out his entire position in the shares prior to the end of the year (and stayed out of the stock for the required 30-day period), the wash sale transactions actually become meaningless, and Larry can compute his gains and losses as he regularly would.

So, remember: the wash sale rules really only apply when the transactions bridge two tax years. You can trade all you want throughout the year, but if you close out your position prior to the end of the tax year and stay out for the required period of time, the wash sale issues are really not important. But, if you hold on to just one little share into the new tax year, you can look forward to making a bunch of wash sale computations.

One final note: while the wash sale provisions work on shares that you sell for a loss, there are no corresponding provisions for stock that you sell at a gain and then immediately repurchase. So, while wash sale losses can't be claimed, gains can't be avoided. That is, if you sell stock for a gain and buy it right back, you must still report the entire gain -- no special gain deferral rule applies.

 

[ArmenK]

Originally posted by: TranceNation
Also, this site too http://www.fool.com/taxes/2000/taxes001006.htm .

But, and this is a very big "but," the wash sale rules really become moot if you close out your entire position in the stock prior to the end of the year... and then stay out of the stock for the required 30-day period before or after the date of the loss sale.

Let's look at Larry again. He certainly has a wash sale in the example above. But, let's say that Larry tires of his position in ABC Co. and sells his 500 shares on December 20th of the same year for $4,000. Larry's adjusted basis in the shares is $10,200 based on his wash sale computations, and his overall loss would amount to $6,200.

But, if you break down the two separate "buy" and "sell" transactions, you see that Larry generated a loss of $7,000 on the first transaction, and a gain of $800 on the second transaction -- amounting to a "net" loss of $6,200. This, amazingly, is the same amount of loss Larry computes when taking the wash sale and basis adjustment rules into account. So, since Larry closed out his entire position in the shares prior to the end of the year (and stayed out of the stock for the required 30-day period), the wash sale transactions actually become meaningless, and Larry can compute his gains and losses as he regularly would.

So, remember: the wash sale rules really only apply when the transactions bridge two tax years. You can trade all you want throughout the year, but if you close out your position prior to the end of the tax year and stay out for the required period of time, the wash sale issues are really not important. But, if you hold on to just one little share into the new tax year, you can look forward to making a bunch of wash sale computations.

One final note: while the wash sale provisions work on shares that you sell for a loss, there are no corresponding provisions for stock that you sell at a gain and then immediately repurchase. So, while wash sale losses can't be claimed, gains can't be avoided. That is, if you sell stock for a gain and buy it right back, you must still report the entire gain -- no special gain deferral rule applies.

this is interesting, i always thought it didnt matter on the date. im still kind of confused. can anyone clear this up?

 

[BillGates]

Don't forget to wash your arse in the shower.

 

[DonaldC]

So try it and let us know if the IRS throws you in jail.

 

[manly]

I am not an accountant and shouldn't be dispensing any tax advice, but my research tended to support the conclusion that if you close out your position, the final sale does not trigger the wash sale rule.

Here was my thread on the topic.

I'm not really grokking this thread, but I see two misconceptions with your reasoning.

First, you seem to be asking if you completely close out your position, does that retroactively remove the wash sale rule from earlier trades in the year. IMO the answer to that is clearly NO. Let's say you sold stock & repurchased in January of a calendar year, triggering the wash sale rule. In December, you again sold stock, repurchased stock & then sold the stock to close out the position. The transactions in December do not need to be considered under wash sale rules because you closed out the position. However, they have no affect on the January transactions with regards to the wash sale rule. I mention this specific issue in the thread referenced above.

Secondly, if you're asking if the wash sale rule does not apply if you "repurchase" shares in the following calendar year, I would suspect they do apply. For example, if you sold shares on December 20, and then repurchased substantially similar shares on Jan 15, you're still within the 30 day time limit. I don't know what you would report on each of the annual tax returns, but I see no reason why the wash sale rule doesn't apply just because they happened to span two calendar years. The wash sale rule exists specifically to disable this type of tax trick, so an exception for December/January would be completely ironic!

But like I said, I'm not an accountant and I'm just throwing some ideas out there based on what I interpreted your question to be. There are some nuances to the standard sell/repurchase scenario that you've already read about, and I have a link in the thread I mentioned above.