Wash Sale Mistake

[Roger Fitzsimmons]

I wanted to take a tax loss so I sold ABCD at a loss, planning to buy EFGH, but I mistakenly bought back ABCD. I bought more than I sold.

Say my cost basis in ABCD was $35,000 and I told it for $31,500. I know this $3500 loss is not deductible. Say further than I bought $63,000 of ABCD. Is my cost basis on this position $66,500? If I wait 30 days to sell it (do I have to?) and then don't buy it back within 30 days, will my cost basis on the next sale be $66,500?

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[ira smilovitz]

On Monday, May 2, 2022 at 5:09:45 PM UTC-4, Roger Fitzsimmons wrote:
> I wanted to take a tax loss so I sold ABCD at a loss, planning to buy EFGH, but I mistakenly bought back ABCD. I bought more than I sold.
>
> Say my cost basis in ABCD was $35,000 and I told it for $31,500. I know this $3500 loss is not deductible. Say further than I bought $63,000 of ABCD. Is my cost basis on this position $66,500? If I wait 30 days to sell it (do I have to?) and then don't buy it back within 30 days, will my cost basis on the next sale be $66,500?
>
> --

You need to look at this on a per share basis. Let's assume your initial transaction was for 100 shares and the repurchase was 200 shares. Your new purchase will be divided into two lots: 100 shares with a holding period that begins on the first purchase buy date, with a cost basis of $31500 + $3500 wash sale adjustment. The second lot of 100 shares will have a holding period which begins on the repurchase date with a cost basis of $31500. (Technically the holding period begins the day after the purchase date.)

What happens when you sell these shares depends entirely on whether there is a gain or loss within each of the two lots considered independently. If you sell a lot of stock at a loss and don't buy it back within 30 days (before and after) the sale date, there is no further wash sale and you recognize the full loss. If you buy back again within the wash sale window, you calculate a new wash sale adjustment.

Ira Smilovitz, EA
Leonia, NJ