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Form 1099b is the disallowed wash sale amount added back

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into the cost basis?...
form 1099b is the disallowed wash sale amount added back into the cost basis?
Submitted: 1 year ago.Category: Tax
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Customer reply replied 1 year ago
Can I just add the total disallowed wash sale amount to the total cost basis?
Answered in 5 minutes by:
2/23/2016
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 year ago
Tax.appeal.168
Tax.appeal.168, Tax Accountant
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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.

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Customer reply replied 1 year 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
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 year 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.

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Tax Professional: Tax.appeal.168, Tax Accountant replied 1 year ago

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

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

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Customer reply replied 1 year 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...
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 year ago

Yes, the cost basis of the replacement purchase.

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Customer reply replied 1 year ago
could I send you the 1st page of my 1099b ?
Tax Professional: Tax.appeal.168, Tax Accountant replied 1 year 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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