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Form 1099b is the disallowed wash sale amount added back

Customer Question

form 1099b is the disallowed wash sale amount added back into the cost basis?
Submitted: 9 months ago.
Category: Tax
Customer: replied 9 months ago.
Can I just add the total disallowed wash sale amount to the total cost basis?
Expert:  Tax.appeal.168 replied 9 months ago.

Q: Can I just add the total disallowed wash sale amount to the total cost basis?

A: Based on the following information, the answer is no. SEE BELOW:

How do wash sales work?
A wash sale will trigger several consequences. First, if you violate the wash sale rule you can't claim your loss. Instead, your loss will be added to the cost basis of the replacement purchase. When you sell the replacement stock, you can recognize the previously disallowed loss. Your holding period for the replacement stock includes the holding period of the stock you sold.

Here's a quick example of a wash sale.

On 9/30/XX, you buy 500 shares of ABC at $10 per share. One year later the stock price starts to drop, and you sell all your shares at $9 per share on 10/4/XY. Two days later, on 10/6, ABC bottoms out at $8 and you buy 500 shares again. This series of trades triggers a wash sale.

The holding period of the original shares will be added to the holding period of the replacement shares, effectively leaving you with a long-term position. Additionally, the cost basis on your 10/6 purchase will be adjusted to $4,500, reflecting the cost of acquisition ($4,000) plus the $500 disallowed loss from your 10/4 sale.

REFERENCE SOURCE:

http://www.schwab.com/public/schwab/nn/articles/A-Primer-on-Wash-Sales

Let me know if I can be of further assistance to you regarding this matter. If not, a positive rating of 3 or more stars is appreciates so that I can receive credit for assisting you today.

Customer: replied 9 months ago.
I am a trader and enter and exit many positions which resulted in many wash sales, most disallowed. I made a similar amount of trades last year and only had a few as disallowed
Expert:  Tax.appeal.168 replied 9 months ago.

That does not change the fact of the rules that your loss has to be added to the cost basis of the replacement purchase.

Expert:  Tax.appeal.168 replied 9 months ago.

Additional information and examples can be found at the following link;

https://research.scottrade.com/knowledgecenter/Public/education/article?docId=8bff29354aa1489a8ddcd9b002e50656

Customer: replied 9 months ago.
Sorry for the confusion. That is what I wanted to know, if the loss can be added to the cost basis . These are short sales, so it get a little more tricky...
Expert:  Tax.appeal.168 replied 9 months ago.

Yes, the cost basis of the replacement purchase.

Customer: replied 9 months ago.
could I send you the 1st page of my 1099b ?
Expert:  Tax.appeal.168 replied 9 months ago.

My apologies, but I am about to leave the computer for a few hours. I can contact you when I return and send you an additional services request and if you accept, you can send it over to me.

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