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I wish to ask Dr. Lane, J.D. tax question regarding "wash…

Customer Question
I wish to ask Dr...
I wish to ask Dr. Lane, J.D. tax
question regarding "wash sale" of stocks to get a realized loss.
I am planning to sell several stocks on which I have a loss.
I do not plan to purchase back any of these stocks in the next 31 days.
Questions:
a) I wished to sell on Dec 22, 2017 200 stocks (MOMO hold for 40 days) on which I had loss. By accident instead of selling them I bought another 200 stocks. If I sell in the next 2-3 days all these 400 stocks - will this be a wash sale for the tax purpose?
b) I had 200 MU stocks and on November 28, 2017, I purchased another 100 MU stocks. Since the stock lost value I wish to sell all of them to take a loss. Till this be a wash sale for the tax purpose?
Submitted: 1 month ago.Category: Tax
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12/27/2017
Tax Professional: Barbara, Enrolled Agent replied 1 month ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,767
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Customer reply replied 1 month ago
pls proceed
Tax Professional: Barbara, Enrolled Agent replied 1 month ago

Based on the information you provided (you will be selling ALL shares), neither a) nor b) would be considered a wash sale.

My goal is to provide you with excellent service. Please take a moment to rate my answer with a 5-star rating to let me know that I have achieved my goal.

Thank you and best regards,

Barb

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Customer reply replied 1 month ago
Thank you Barb,
I am asking these questions because financial advisor from the brokerage has a different opinion and seems to be obsessed with “wash sale” for tax purpose that annulate the possibility to use stock loss against the gains on other stocks. So please carefully check and reassure me.Regarding scenarios
a) I wished to sell on Dec 22, 2017, 200 stocks (MOMO hold for 40 days) on which I had a loss. By accident instead of selling them, I bought another 200 stocks. If I sell on December 29, 2017, all these 400 stocks - will this be a wash sale for the tax purpose? My wife has in her brokerage account (another brokerage) the same MOMO stock (50) purchased in August 2017. Does she have to sell this stock at the same time as above listed 400 stocks in my account? And if she sells them with a loss will this be a “wash sale” for the tax purpose? – we file a common tax return.b) I purchased 50 DAIO stocks on Nov 22, 2017, and another 50 DAIO on November 29, 2017. All they have a loss. If I sell them all on Dec 29, 2017, will this loss be a “wash sale” for the tax purpose?c) Related question. If I sell a stock purchased 20 days ago with a loss will this count as a loss that can offset a gain on another stock?Sorry for all these questions, but I have heard so many different opinions, and thank you for your response,
Many thanks and kind regards,Andrew
Tax Professional: Barbara, Enrolled Agent replied 1 month ago

I'll research this further for you, Andrew.

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Tax Professional: Barbara, Enrolled Agent replied 1 month ago

Hi, Andrew.

I conferred with an esteemed colleague of mine, who is an ACE on all tax issues. He is an actively practicing CPA with over 30 years of experience.

First, here is the IRS guidance:

If the number of shares of substantially identical stock or securities you buy within 30 days before or after the sale is either more or less than the number of shares you sold, you must determine the particular shares to which the wash sale rules apply. You do this by matching the shares bought with an equal number of the shares sold. Match the shares bought in the same order that you bought them, beginning with the first shares bought. The shares or securities so matched are subject to the wash sale rules.

Example 1. You bought 100 shares of M stock on September 21, 2015, for $5,000. On December 14, 2015, you bought 50 shares of substantially identical stock for $2,750. On December 21, 2015, you bought 25 shares of substantially identical stock for $1,125. On January 4, 2016, you sold for $4,000 the 100 shares you bought in September. You have a $1,000 loss on the sale. However, because you bought 75 shares of substantially identical stock within 30 days before the sale, you cannot deduct the loss ($750) on 75 shares. You can deduct the loss ($250) on the other 25 shares. The basis of the 50 shares bought on December 14, 2015, is increased by two-thirds (50 ÷ 75) of the $750 disallowed loss. The new basis of those shares is $3,250 ($2,750 + $500). The basis of the 25 shares bought on December 21, 2015, is increased by the rest of the loss to $1,375 ($1,125 + $250).

And here is the analysis:

The wash sale would apply to the first lot of stocks, but the loss would be deferred into the second lot, which you also sold. You would have no loss on the first lot, and a higher loss on the second lot.

Wash sales require that you still have to have some of the stock left to have the loss deferred into. Since you sold all of the stock, there is nothing left. All loss would be recognized.

Make sense?

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