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Wash sales and dividend reinvestment
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Stan Brown
Jan 10, 2020, 9:54:19 PM1/10/20
to
A recent thread asked about triggering the wash-sale rule by selling
a mutual fund or ETF that was enrolled in dividend reinvestment.
I'm in that situation too. The money impact isn't that great --15% of
$660 -- but the paperwork is daunting.
Is there any chance that automatic dividend reinvestments could be an
exception to the wash-sale rules? At worst they're a partial
exception, since they tend to be fractional shares. Unfortunately,
Vanguard's VXUS ETF (international stock index) declares large
quarterly dividends, compared for example to the total US stock fund,
VTI. The December VXUS dividend was about 10% of the dollar value I
want to sell for rebalancing.
Here's a URL I found on this issue:
https://www.marottaonmoney.com/mailbag-what-cost-basis-method-do-i-
want-for-vanguard-mutual-funds/
Quote: "For the casual investor I suggest you ignore the effects of
wash sales. Vanguard (and other brokers) are not required to compute
the tax consequences of a wash sale and adjust the cost basis of
shares appropriately. If you are making $1,000 investments every
month and then need to withdraw $30,000, and you have a trade lot
with a significant loss, the wash sale rules will realize $29,000 of
the loss and be subject to using the $1,000 trade lot that is within
30 days. For the casual investor, the benefits of saving and
investing $1,000 every month or reinvesting dividends outweigh the
potential wash sale if you you don?t think you are going to have
frequent withdrawals."
I don't quite understand what is meant by "ignore the effects of wash
sales". Does he mean that they _are_ wash sales, but we shouldn't let
them affect out investing strategy, including rebalancing? Or does
that bit about "are not required to compute the tax consequences"
mean that if I sell at a loss with 30 days after a dividend
reinvestment I am truly not subject to the wash-sale rule? This is an
ETF, if it matters -- not an individual stock or even an old-style
mutual fund.
--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://BrownMath.com/
http://OakRoadSystems.com/
Shikata ga nai...
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
a mutual fund or ETF that was enrolled in dividend reinvestment.
I'm in that situation too. The money impact isn't that great --15% of
$660 -- but the paperwork is daunting.
Is there any chance that automatic dividend reinvestments could be an
exception to the wash-sale rules? At worst they're a partial
exception, since they tend to be fractional shares. Unfortunately,
Vanguard's VXUS ETF (international stock index) declares large
quarterly dividends, compared for example to the total US stock fund,
VTI. The December VXUS dividend was about 10% of the dollar value I
want to sell for rebalancing.
Here's a URL I found on this issue:
https://www.marottaonmoney.com/mailbag-what-cost-basis-method-do-i-
want-for-vanguard-mutual-funds/
Quote: "For the casual investor I suggest you ignore the effects of
wash sales. Vanguard (and other brokers) are not required to compute
the tax consequences of a wash sale and adjust the cost basis of
shares appropriately. If you are making $1,000 investments every
month and then need to withdraw $30,000, and you have a trade lot
with a significant loss, the wash sale rules will realize $29,000 of
the loss and be subject to using the $1,000 trade lot that is within
30 days. For the casual investor, the benefits of saving and
investing $1,000 every month or reinvesting dividends outweigh the
potential wash sale if you you don?t think you are going to have
frequent withdrawals."
I don't quite understand what is meant by "ignore the effects of wash
sales". Does he mean that they _are_ wash sales, but we shouldn't let
them affect out investing strategy, including rebalancing? Or does
that bit about "are not required to compute the tax consequences"
mean that if I sell at a loss with 30 days after a dividend
reinvestment I am truly not subject to the wash-sale rule? This is an
ETF, if it matters -- not an individual stock or even an old-style
mutual fund.
--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://BrownMath.com/
http://OakRoadSystems.com/
Shikata ga nai...
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2011) - All rights reserved. >>
<< ------------------------------------------------------- >>
tar...@google.com
Jan 11, 2020, 1:39:37 AM1/11/20
to
On Friday, January 10, 2020 at 1:54:19 PM UTC-8, Stan Brown wrote:
First off, IANAL nor do I play one on TV.
> Is there any chance that automatic dividend reinvestments could be an
> exception to the wash-sale rules?
Not that I am aware of.
> Here's a URL I found on this issue:
> https://www.marottaonmoney.com/mailbag-what-cost-basis-method-do-i-
> want-for-vanguard-mutual-funds/
> Quote: "For the casual investor I suggest you ignore the effects of
> wash sales. Vanguard (and other brokers) are not required to compute
> the tax consequences of a wash sale and adjust the cost basis of
> shares appropriately. If you are making $1,000 investments every
> month and then need to withdraw $30,000, and you have a trade lot
> with a significant loss, the wash sale rules will realize $29,000 of
> the loss and be subject to using the $1,000 trade lot that is within
> 30 days. For the casual investor, the benefits of saving and
> investing $1,000 every month or reinvesting dividends outweigh the
> potential wash sale if you you don?t think you are going to have
> frequent withdrawals."
>
> I don't quite understand what is meant by "ignore the effects of wash
> sales".
My take on this is that the advice is to forego the tax benefit of using
the part of the loss disallowed by the wash sale to increase the basis of
your remaining shares. In other words, you just choose not to deduct the
part of the loss that ends up being covered by the wash sale rules and in
end effect pay more tax.
So, to work the example a bit more.
You sell at a $30,000 loss, but $1,000 of that loss is disallowed as because
of a distribution making this a wash sale.
Say that leaves you with exactly 1000 shares remaining, you could do one of
* Use the wash sale rules to increase the basis of each share by $1, which
would reduce eventual future gains by the foregone $1000 loss once you sell
all of those remaining shares.
* Choose to ignore the increase in basis due to the wash sale. That would leave
you with the original basis in the remaining shares, so when you sell them
you need do nothing special. The $1000 loss you couldn't take because of the
wash sale is just gone forever. You end up paying more tax in total, but get
the simplification of not having to deal with the wash sale rules.
In the unlikely event that the IRS objects, they would have to pay a refund.
On the other hand, you pay more tax than you strictly would be required to.
But as the government is running a deficit, you could claim civic karma points
for making a small additional contribution to the nation.
First off, IANAL nor do I play one on TV.
> Is there any chance that automatic dividend reinvestments could be an
> exception to the wash-sale rules?
> Here's a URL I found on this issue:
> https://www.marottaonmoney.com/mailbag-what-cost-basis-method-do-i-
> want-for-vanguard-mutual-funds/
> Quote: "For the casual investor I suggest you ignore the effects of
> wash sales. Vanguard (and other brokers) are not required to compute
> the tax consequences of a wash sale and adjust the cost basis of
> shares appropriately. If you are making $1,000 investments every
> month and then need to withdraw $30,000, and you have a trade lot
> with a significant loss, the wash sale rules will realize $29,000 of
> the loss and be subject to using the $1,000 trade lot that is within
> 30 days. For the casual investor, the benefits of saving and
> investing $1,000 every month or reinvesting dividends outweigh the
> potential wash sale if you you don?t think you are going to have
> frequent withdrawals."
>
> I don't quite understand what is meant by "ignore the effects of wash
> sales".
the part of the loss disallowed by the wash sale to increase the basis of
your remaining shares. In other words, you just choose not to deduct the
part of the loss that ends up being covered by the wash sale rules and in
end effect pay more tax.
So, to work the example a bit more.
You sell at a $30,000 loss, but $1,000 of that loss is disallowed as because
of a distribution making this a wash sale.
Say that leaves you with exactly 1000 shares remaining, you could do one of
* Use the wash sale rules to increase the basis of each share by $1, which
would reduce eventual future gains by the foregone $1000 loss once you sell
all of those remaining shares.
* Choose to ignore the increase in basis due to the wash sale. That would leave
you with the original basis in the remaining shares, so when you sell them
you need do nothing special. The $1000 loss you couldn't take because of the
wash sale is just gone forever. You end up paying more tax in total, but get
the simplification of not having to deal with the wash sale rules.
In the unlikely event that the IRS objects, they would have to pay a refund.
On the other hand, you pay more tax than you strictly would be required to.
But as the government is running a deficit, you could claim civic karma points
for making a small additional contribution to the nation.
joeu2...@gmail.com
Jan 11, 2020, 6:10:54 PM1/11/20
to
On Friday, January 10, 2020 at 1:54:19 PM UTC-8, Stan Brown wrote:
> A recent thread asked about triggering the wash-sale rule by selling
> a mutual fund or ETF that was enrolled in dividend reinvestment.
> [....]
> a mutual fund or ETF that was enrolled in dividend reinvestment.
> Is there any chance that automatic dividend reinvestments could be an
> exception to the wash-sale rules?
Thank you. That was indeed the purpose of my earlier posting. I wish that I had been as clear as you. But since I was posting to misc.TAXES.moderated, I presumed that it was clear that I was seeking this kind of __tax__ comments (not "advice" -- wink), not investment advice.
> exception to the wash-sale rules?
And such "clever" investment advice, at that (not!): avoid wash sale rules by not reinvesting dividends. Now, why didn't I think of that? (wink)
On Friday, January 10, 2020 at 1:54:19 PM UTC-8, Stan Brown wrote:
> I'm in that situation too. The money impact isn't that great --15% of
> $660 -- but the paperwork is daunting.
Yes. And absent knowledgeable advice that it is reasonable to ignore the wash sale rules in this particular case, I was hoping to get practical advice for how to track such wash sales.
> $660 -- but the paperwork is daunting.
To that end, I would appreciate it if you would share the details of the "daunting paperwork" that you maintain. An Excel spreadsheet-like design would be nice.
Many decades ago, I remember seeing something in the CCH tax guides. But I no longer have access to such information, if it even still exists today.
Admittedly, I have become lax in keeping tax records for investments, because my brokerages do it for "covered" securities and even unofficially for "uncovered" securities. I was surprised to read that Vanguard records do not reflect the effects of wash sales.
But the record-keeping and reporting problems still exist for wash sales in cross-brokerage accounts. Of course, no individual brokerage can track that.
joeu2...@gmail.com
Jan 11, 2020, 6:50:58 PM1/11/20
to
On Friday, January 10, 2020 at 5:39:37 PM UTC-8, tar...@google.com wrote:
> My take on this is that the advice is to forego the tax benefit of using
> the part of the loss disallowed by the wash sale to increase the basis of
> your remaining shares. In other words, you just choose not to deduct the
> part of the loss that ends up being covered by the wash sale rules and in
> end effect pay more tax.
Good thought. In fact, that is the approach that I had thought of taking.
> My take on this is that the advice is to forego the tax benefit of using
> the part of the loss disallowed by the wash sale to increase the basis of
> your remaining shares. In other words, you just choose not to deduct the
> part of the loss that ends up being covered by the wash sale rules and in
> end effect pay more tax.
However, it still requires that I scrutinize the automatic transactions for possible wash sale consequences. I'm lazy.
And I believe that still creates complications in reporting the transactions on tax returns, especially for "covered" securities. Again, I'm lazy. And I'm wary. I avoid column-G adjustments on Form 8949 and Sched D not only to avoid the extra paperwork, but also because I worry that it attracts the attention of the IRS.
Also, it is unclear to me if and how wash sales affects the average basis reported by mutual funds. I have been assuming that the MF does that for me. But I don't think even that assumption applies when holding the same MF in multiple brokerage accounts (with the same SSN).
(Fortunately, that is only a hypothetical problem for me at the moment.)
Stan Brown
Jan 19, 2020, 5:28:21 PM1/19/20
to
On Fri, 10 Jan 2020 16:53:10 EST, Stan Brown wrote:
>
> A recent thread asked about triggering the wash-sale rule by selling
> a mutual fund or ETF that was enrolled in dividend reinvestment.
>
>
> A recent thread asked about triggering the wash-sale rule by selling
> a mutual fund or ETF that was enrolled in dividend reinvestment.
>
> Is there any chance that automatic dividend reinvestments could be an
> exception to the wash-sale rules? At worst they're a partial
> exception, since they tend to be fractional shares.
Thanks to those who replied, even though the answer wasn't the one I
> exception to the wash-sale rules? At worst they're a partial
> exception, since they tend to be fractional shares.
wanted. :-)
I've been doing more reading, and it's even worse than I thought (or
knew to ask) a week ago. For those who may not know about Revenue
Ruling 2008-5:
If you have the same or "substantially identical" securities in an
IRA and a non-IRA account, selling in the non-IRA and buying in the
IRA can trigger the wash-sale rule, and in that case the capital loss
is not just deferred but permanently lost: you can't step up the
basis of the purchased security in your IRA and you can't offset the
capital loss in your non-IRA against any other capital gains, nor
against ordinary income. And because it's different accounts, the
brokerage may provide little or no help with the accounting. Yikes!
And all of the above is true even if the accounts are in different
brokerages.
For this reason, it looks like it is prudent not to have the same
securities, or the same mutual funds or ETFs, in a non-IRA account
and an IRA.
https://www.investopedia.com/articles/retirement/09/ira-wash-sale-
rule.asp
http://www.tradelogsoftware.com/blog/ira-wash-sales/
I know griping about taxes is pointless, but it really does seem that
applying the wash-sale rule to _automatic_ dividend reinvestments is
unreasonable and unfair. It causes a lot of nasty paperwork,
victimizes people who aren't actually trying to do a tax fiddle, yet
doesn't get much money for the Treasury. And because the wash-sale
rule is for a purchase or reinvestment 30 days before _or_ after the
sale, even if you know about wash sales you can't stop one from
happening unless you turn off dividend reinvestment, thus going
against good investment strategy.
Ian Pilcher
Jan 19, 2020, 7:53:35 PM1/19/20
to
On 1/19/20 11:27 AM, Stan Brown wrote:
> I know griping about taxes is pointless, but it really does seem that
> applying the wash-sale rule to _automatic_ dividend reinvestments is
> unreasonable and unfair. It causes a lot of nasty paperwork,
> victimizes people who aren't actually trying to do a tax fiddle, yet
> doesn't get much money for the Treasury. And because the wash-sale
> rule is for a purchase or reinvestment 30 days before _or_ after the
> sale, even if you know about wash sales you can't stop one from
> happening unless you turn off dividend reinvestment, thus going
> against good investment strategy.
How about triggering the wash sale rule simply because a broker split a
> I know griping about taxes is pointless, but it really does seem that
> applying the wash-sale rule to _automatic_ dividend reinvestments is
> unreasonable and unfair. It causes a lot of nasty paperwork,
> victimizes people who aren't actually trying to do a tax fiddle, yet
> doesn't get much money for the Treasury. And because the wash-sale
> rule is for a purchase or reinvestment 30 days before _or_ after the
> sale, even if you know about wash sales you can't stop one from
> happening unless you turn off dividend reinvestment, thus going
> against good investment strategy.
single order into multiple lots?
--
========================================================================
Ian Pilcher arequ...@gmail.com
-------- "I grew up before Mark Zuckerberg invented friendship" --------
========================================================================
Stuart O. Bronstein
Jan 20, 2020, 9:24:53 AM1/20/20
to
Ian Pilcher <arequ...@gmail.com> wrote:
> Stan Brown wrote:
>> I know griping about taxes is pointless, but it really does seem
>> that applying the wash-sale rule to _automatic_ dividend
>> reinvestments is unreasonable and unfair. It causes a lot of
>> nasty paperwork, victimizes people who aren't actually trying to
>> do a tax fiddle, yet doesn't get much money for the Treasury. And
>> because the wash-sale rule is for a purchase or reinvestment 30
>> days before _or_ after the sale, even if you know about wash
>> sales you can't stop one from happening unless you turn off
>> dividend reinvestment, thus going against good investment
>> strategy.
>
> How about triggering the wash sale rule simply because a broker
> split a single order into multiple lots?
The rule was created for a purpose - to prevent someone from taking a
> Stan Brown wrote:
>> I know griping about taxes is pointless, but it really does seem
>> that applying the wash-sale rule to _automatic_ dividend
>> reinvestments is unreasonable and unfair. It causes a lot of
>> nasty paperwork, victimizes people who aren't actually trying to
>> do a tax fiddle, yet doesn't get much money for the Treasury. And
>> because the wash-sale rule is for a purchase or reinvestment 30
>> days before _or_ after the sale, even if you know about wash
>> sales you can't stop one from happening unless you turn off
>> dividend reinvestment, thus going against good investment
>> strategy.
>
> How about triggering the wash sale rule simply because a broker
> split a single order into multiple lots?
loss on stock but then essentially keeping the stock. It's a pretty
blunt tool and perhaps could be more nuanced. But unfortunately at
the moment it's not. If you have a better idea, write to your
senator or congress person. They might appreciate an alternative
that would work as well but be more nuanced.
--
Stu
http://DownToEarthLawyer.com
Ian Pilcher
Jan 20, 2020, 3:45:29 PM1/20/20
to
On 1/20/20 3:22 AM, Stuart O. Bronstein wrote:
bitten ...
In the multiple lots case, do Congress and/or the IRS even need to act?
AFAIK, there's nothing that requires a broker to report a wash sale when
a single order is executed as multiple lots, milliseconds apart.
--
========================================================================
Ian Pilcher arequ...@gmail.com
-------- "I grew up before Mark Zuckerberg invented friendship" --------
========================================================================
> Ian Pilcher <arequ...@gmail.com> wrote:
>>
>> How about triggering the wash sale rule simply because a broker
>> split a single order into multiple lots?
>
> The rule was created for a purpose - to prevent someone from taking a
> loss on stock but then essentially keeping the stock. It's a pretty
> blunt tool and perhaps could be more nuanced. But unfortunately at
> the moment it's not. If you have a better idea, write to your
> senator or congress person. They might appreciate an alternative
> that would work as well but be more nuanced.
>
As Stan wrote, griping about taxes is pointless, but I've already
>>
>> How about triggering the wash sale rule simply because a broker
>> split a single order into multiple lots?
>
> The rule was created for a purpose - to prevent someone from taking a
> loss on stock but then essentially keeping the stock. It's a pretty
> blunt tool and perhaps could be more nuanced. But unfortunately at
> the moment it's not. If you have a better idea, write to your
> senator or congress person. They might appreciate an alternative
> that would work as well but be more nuanced.
>
bitten ...
In the multiple lots case, do Congress and/or the IRS even need to act?
AFAIK, there's nothing that requires a broker to report a wash sale when
a single order is executed as multiple lots, milliseconds apart.
--
========================================================================
Ian Pilcher arequ...@gmail.com
-------- "I grew up before Mark Zuckerberg invented friendship" --------
========================================================================
Stan Brown
Jan 21, 2020, 12:56:23 AM1/21/20
to
On Mon, 20 Jan 2020 10:45:09 EST, Ian Pilcher wrote:
> In the multiple lots case, do Congress and/or the IRS even need to act?
> AFAIK, there's nothing that requires a broker to report a wash sale when
> a single order is executed as multiple lots, milliseconds apart.
Maybe I'm missing something, but how would selling at a loss in
> In the multiple lots case, do Congress and/or the IRS even need to act?
> AFAIK, there's nothing that requires a broker to report a wash sale when
> a single order is executed as multiple lots, milliseconds apart.
multiple lots avoid triggering the wash-sale rules?
--
Stan Brown, Oak Road Systems, Tompkins County, New York, USA
http://BrownMath.com/
http://OakRoadSystems.com/
Shikata ga nai...
John Levine
Jan 21, 2020, 12:56:23 AM1/21/20
to
In article <r04g6k$s5u$1...@dont-email.me> you write:
>In the multiple lots case, do Congress and/or the IRS even need to act?
>AFAIK, there's nothing that requires a broker to report a wash sale when
>a single order is executed as multiple lots, milliseconds apart.
If it's a single order, the lots will all be sales or all be
>In the multiple lots case, do Congress and/or the IRS even need to act?
>AFAIK, there's nothing that requires a broker to report a wash sale when
>a single order is executed as multiple lots, milliseconds apart.
purchases, so how could that be a wash unless it'd already
be a wash as a single lot?
It seems to me that if you trade often enough that wash sales will be
an issue, don't sign up for DRIP, at least not for the stocks you're
likely to trade. Or if you're forced to sell a stock unexpectedly,
only the most recent DRIP can be a wash.
--
Regards,
John Levine, jo...@taugh.com, Primary Perpetrator of "The Internet for Dummies",
Please consider the environment before reading this e-mail. https://jl.ly
Barry Margolin
Jan 21, 2020, 12:56:23 AM1/21/20
to
In article <r04g6k$s5u$1...@dont-email.me>,
A wash sale is when you have both a sale (at a loss) and a near-time
purchase. When you split an order, it goes from one sale to multiple
sales, or one purchase to multiple purchases. But it's still not one of
each.
--
Barry Margolin
Arlington, MA
Ian Pilcher <arequ...@gmail.com> wrote:
> On 1/20/20 3:22 AM, Stuart O. Bronstein wrote:
> > Ian Pilcher <arequ...@gmail.com> wrote:
> >>
> >> How about triggering the wash sale rule simply because a broker
> >> split a single order into multiple lots?
> >
> > The rule was created for a purpose - to prevent someone from taking a
> > loss on stock but then essentially keeping the stock. It's a pretty
> > blunt tool and perhaps could be more nuanced. But unfortunately at
> > the moment it's not. If you have a better idea, write to your
> > senator or congress person. They might appreciate an alternative
> > that would work as well but be more nuanced.
> >
>
> As Stan wrote, griping about taxes is pointless, but I've already
> bitten ...
>
> In the multiple lots case, do Congress and/or the IRS even need to act?
> AFAIK, there's nothing that requires a broker to report a wash sale when
> a single order is executed as multiple lots, milliseconds apart.
Could someone clarify how splitting the order could make it a wash sale?
> On 1/20/20 3:22 AM, Stuart O. Bronstein wrote:
> > Ian Pilcher <arequ...@gmail.com> wrote:
> >>
> >> How about triggering the wash sale rule simply because a broker
> >> split a single order into multiple lots?
> >
> > The rule was created for a purpose - to prevent someone from taking a
> > loss on stock but then essentially keeping the stock. It's a pretty
> > blunt tool and perhaps could be more nuanced. But unfortunately at
> > the moment it's not. If you have a better idea, write to your
> > senator or congress person. They might appreciate an alternative
> > that would work as well but be more nuanced.
> >
>
> As Stan wrote, griping about taxes is pointless, but I've already
> bitten ...
>
> In the multiple lots case, do Congress and/or the IRS even need to act?
> AFAIK, there's nothing that requires a broker to report a wash sale when
> a single order is executed as multiple lots, milliseconds apart.
A wash sale is when you have both a sale (at a loss) and a near-time
purchase. When you split an order, it goes from one sale to multiple
sales, or one purchase to multiple purchases. But it's still not one of
each.
--
Barry Margolin
Arlington, MA
tar...@google.com
Jan 22, 2020, 12:23:42 AM1/22/20
to
On Monday, January 20, 2020 at 4:56:23 PM UTC-8, Barry Margolin wrote:
"Fidelity showing bogus(?) wash sale"
The scenario was that X shares of stocks were acquired and sold within 30 days.
The sale of the shares generated a loss. But the single order was split into
two lots (X-1 shares and 1 share) sold at slightly different prices ($0.0005)
on the same day, but perhaps a few fractions of a second apart.
The claim in the brokerage reporting was that the first sale at a loss of X-1
shares was a wash sale with respect to the remaining single share. And the
result was an increase in the basis of the remaining single share from that
loss, which resulted in a slightly larger loss on the 1 share when it sold
every so slightly later the same day.
As a matter of net economic and tax impact, this particular wash sale didn't
change anything. Other than making the reporting more complicated, as there was
a basis adjustment (of $0.25) needed for the remaining share.
> In article <>, Ian Pilcher <> wrote:
> > In the multiple lots case, do Congress and/or the IRS even need to act?
> > AFAIK, there's nothing that requires a broker to report a wash sale when
> > a single order is executed as multiple lots, milliseconds apart.
>
> Could someone clarify how splitting the order could make it a wash sale?
> A wash sale is when you have both a sale (at a loss) and a near-time
> purchase. When you split an order, it goes from one sale to multiple
> sales, or one purchase to multiple purchases. But it's still not one of
> each.
Ian had posted an example of this in the thread with subject
> > In the multiple lots case, do Congress and/or the IRS even need to act?
> > AFAIK, there's nothing that requires a broker to report a wash sale when
> > a single order is executed as multiple lots, milliseconds apart.
>
> Could someone clarify how splitting the order could make it a wash sale?
> A wash sale is when you have both a sale (at a loss) and a near-time
> purchase. When you split an order, it goes from one sale to multiple
> sales, or one purchase to multiple purchases. But it's still not one of
> each.
"Fidelity showing bogus(?) wash sale"
The scenario was that X shares of stocks were acquired and sold within 30 days.
The sale of the shares generated a loss. But the single order was split into
two lots (X-1 shares and 1 share) sold at slightly different prices ($0.0005)
on the same day, but perhaps a few fractions of a second apart.
The claim in the brokerage reporting was that the first sale at a loss of X-1
shares was a wash sale with respect to the remaining single share. And the
result was an increase in the basis of the remaining single share from that
loss, which resulted in a slightly larger loss on the 1 share when it sold
every so slightly later the same day.
As a matter of net economic and tax impact, this particular wash sale didn't
change anything. Other than making the reporting more complicated, as there was
a basis adjustment (of $0.25) needed for the remaining share.
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