How does one recover the amount of a disallowed loss?
As I understand it, if shares are repurchased, we can add the amount of the disallowed loss to the cost basis of the new shares.
But what if no new shares are purchased? Can it really be that the IRS
is telling investors if they buy something outright and sell within 31 days (ignoring the 61-day window here, given that I am not talking about repurchasing shares) their loss is disallowed? How is this a wash sale? It's a buy and a sell, period!
What does this do to dollar cost averaging if someone has DCA'd a mutual fund for 10 years and then sells at a loss? Do those 1.3 shares reinvested 30 days ago invalidate the entire 10 year holding period? What am I missing?
Most importantly: if there is a disallowed loss and no new purchase, is that disallowed loss simply "lost" to the investor forever? As part of the same line of thinking, if the investor purchases additional shares AFTER the 61-day window, can they then adjust their basis up by the amount of the previous disallowed loss? Or can the disallowed loss be used to increase the basis for a profitable transaction
in the same security? (Thus reducing the tax