Wash Sale Disallowed.

[Sasha188]

Hi Fellow Traders,
I was helping someone on tax reporting and got a question on wash sale loss disallowed which I have no knowledge in this area. Basically this person had wash sale loss disallowed(from Jan-Aug) of $240k, realized loss of ($280k). Then wash sale loss disallowed(from Sep-Dec) of $17K, realized gain of $12K. What's the net short term loss should be reported?

Any inputs will be helpful. Thank you in advance.

Sasha

 

[gerryg]

Since its loss, take smallest numbers of 252K

 

[Sasha188]

Since its loss, take smallest numbers of 252K

Thanks for replying Gerryg. May I ask how did u get 252k calculated?

This person started acct with 100k. ended up around 65k at year end. so loss of anything over 100k doesn't sound right to me. Based on his broker, he was advised to calculate the short term loss as (280k)+240k+17k+12k=(11k)which doesn't sound right neither. bcz obeviously, he lost 3x more than that. (

 

[Brumby]

Hi Fellow Traders,
I was helping someone on tax reporting and got a question on wash sale loss disallowed which I have no knowledge in this area. Basically this person had wash sale loss disallowed(from Jan-Aug) of $240k, realized loss of ($280k). Then wash sale loss disallowed(from Sep-Dec) of $17K, realized gain of $12K. What's the net short term loss should be reported?

Any inputs will be helpful. Thank you in advance.

Sasha

It is an IRS provision and without knowing the individual stock transactions it is impossible to be determinative because it is a matching provision.

The best I can determine is that for the period Jan to Aug, the actual loss is the realised loss of $280K less the wash sale loss of $240K = $40K. This loss is offset against the period Sep to Dec of $12K realised gain which results in net loss of $28K that can be claimed. How much of wash sale loss that can is carried forward is hard to establish but my guess would be the loss in equity ($100-$65) of $35K less loss claim with the IRS of $28K = $7K as wash sale loss that is carried forward as a cost base.

 

[Sasha188]

It is an IRS provision and without knowing the individual stock transactions it is impossible to be determinative because it is a matching provision.

The best I can determine is that for the period Jan to Aug, the actual loss is the realised loss of $280K less the wash sale loss of $240K = $40K. This loss is offset against the period Sep to Dec of $12K realised gain which results in net loss of $28K that can be claimed. How much of wash sale loss that can is carried forward is hard to establish but my guess would be the loss in equity ($100-$65) of $35K less loss claim with the IRS of $28K = $7K as wash sale loss that is carried forward as a cost base.

Thanks a lot Brumby for your input. I appreciated it highly.
Your number makes lots of sense to me. So the 17K wash sale disallowed from Sep to Dec no need to be reported(or say should carry forward to next year?). I was staring at these numbers and thinking if 280-240=(40k) (Loss from Jan-Aug); 17-12=5k(net gain from Sep-Dec), thus (40k)-5K=(35K) net loss report for the year make sense to you?

For now, still no clear answer. Continuing research...

 

[Brumby]

thus (40k)-5K=(35K) net loss report for the year make sense to you?

In theory, the total loss from the equity i.e. $35K should be the amount of loss claimable provided none of that is caught within the wash sale provision. Since we are making a top down assessment and not a bottom up determination as required under the IRS matching provision, we simply do not have sufficient data to make a definitive conclusion. Presumably the equity balance is marked to market daily, the balance is just a reflection of daily market valuation. In order to make a claim under IRS provisions, it must be realised and not subject to wash sale limits.

 

[Sasha188]

In theory, the total loss from the equity i.e. $35K should be the amount of loss claimable provided none of that is caught within the wash sale provision. Since we are making a top down assessment and not a bottom up determination as required under the IRS matching provision, we simply do not have sufficient data to make a definitive conclusion. Presumably the equity balance is marked to market daily, the balance is just a reflection of daily market valuation. In order to make a claim under IRS provisions, it must be realised and not subject to wash sale limits.

Thanks Brumby. I agreed the "none of that is caught within the wash sale provision" part. Thus, the number of 35k doesn't seem right neither. I can't obtain much info from 1099 neither. It seems only have short term loss, wash sale disallowed and short/long term gain etc summarized info.

Dumb question, what is "top down assessment"? Thanks!

 

[Brumby]

Thanks Brumby. I agreed the "none of that is caught within the wash sale provision" part. Thus, the number of 35k doesn't seem right neither. I can't obtain much info from 1099 neither. It seems only have short term loss, wash sale disallowed and short/long term gain etc summarized info.

Dumb question, what is "top down assessment"? Thanks!

If any wash sale caught out can be discounted in the $35K, then the only logical conclusion in my opinion is that the unaccounted difference is arising from unrealised losses. If there are open positions, then any marked to market valuation will impact the value of the equity balance.

Top down assessment is simply an attempt using known numbers without knowing the specifics. In other words, it is a attempt from the outside looking in.

 

[Sasha188]

If any wash sale caught out can be discounted in the $35K, then the only logical conclusion in my opinion is that the unaccounted difference is arising from unrealised losses. If there are open positions, then any marked to market valuation will impact the value of the equity balance.

Top down assessment is simply an attempt using known numbers without knowing the specifics. In other words, it is a attempt from the outside looking in.

Thanks for your input Brumby. Appreciated it.