Correcting for wash sales


J

Jay Levitt

Could somebody check my "Quicken math" on this?

I buy 100 shares of ABC on 1/1/05, and sell all 100 on 3/1/05 for a $25
loss.

I then buy 10 shares of ABC @ 10 ea. on 3/15/05 (total cost: $100). I
don't sell them during 2005.

The sale on 3/1/05 is now a wash sale. So I:

- Add a $25 offsetting transaction to my Schedule D spreadsheet
- Change the "Buy" on 3/15 into an "AddShares/ShrsIn" so I can set the lot
date to 1/1/05
- Add a MiscExp transaction on 3/15 for $100 since I did really buy the
shares
- Add a RtrnCap transaction on 3/15 for $25 to offset the loss

Is that right? Is that the best way to do this?

Jay Levitt
 
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A

A Count

Could somebody check my "Quicken math" on this?
I buy 100 shares of ABC on 1/1/05, and sell all 100 on 3/1/05 for a $25
loss.
I then buy 10 shares of ABC @ 10 ea. on 3/15/05 (total cost: $100). I
don't sell them during 2005.
The sale on 3/1/05 is now a wash sale. So I:
- Add a $25 offsetting transaction to my Schedule D spreadsheet
- Change the "Buy" on 3/15 into an "AddShares/ShrsIn" so I can set the lot
date to 1/1/05
- Add a MiscExp transaction on 3/15 for $100 since I did really buy the
shares
- Add a RtrnCap transaction on 3/15 for $25 to offset the loss
Is that right? Is that the best way to do this?
Only ten shares is a wash sale...

Sell 90 shares of the first transaction for a 22.50 loss. Sell 10 shares of
the first transaction for break even.
Adjust the basis of the 10 share buy...by -2.50 .
 
A

A Count

Could somebody check my "Quicken math" on this?
Correcting:

Only ten shares is a wash sale...

Sell 90 shares of the first transaction for a 22.50 loss. Sell 10 shares
of the first transaction for break even.
Adjust the basis of the 10 share buy...by +2.50 .
 
T

TomYoung

Jay said:
Could somebody check my "Quicken math" on this?

I buy 100 shares of ABC on 1/1/05, and sell all 100 on 3/1/05 for a $25
loss.

I then buy 10 shares of ABC @ 10 ea. on 3/15/05 (total cost: $100). I
don't sell them during 2005.

The sale on 3/1/05 is now a wash sale. So I:

- Add a $25 offsetting transaction to my Schedule D spreadsheet
- Change the "Buy" on 3/15 into an "AddShares/ShrsIn" so I can set the lot
date to 1/1/05
- Add a MiscExp transaction on 3/15 for $100 since I did really buy the
shares
- Add a RtrnCap transaction on 3/15 for $25 to offset the loss
As a matter of tax law - of which I'm no expert - I think you could
claim 90% of the loss since 10/100 = 10%. However, we'll stick with
your premise that the full $25 has to be added to the basis of the
3/15/05 purchase.

I did it this way:

Left the 1/1/05 Buy and 3/1/05 Sale alone.

Entered an ABC stock RtrnCapX transaction between the Buy and Sell
dates for $25.
(Doesn't affect cash, results in no gain/loss on 3/1/05 which is the
situation for tax purposes, if not GAAP purposes.)

Added the 10 shares of ABC @ $10/sh on 3/15/05 with a lot date of
1/1/05

Entered an ABC stock RtrnCapX transaction on 3/15/05 for ($25).
(Doesn't affect cash, adds to $100 actual cost basis of new 10 shares.)

Did an XOut transaction of $100 on 3/15/05.
(Gets cash in account correct for 3/15/05 purchase, doesn't show up on
a Income/Expense report.)

Of course, I'd document as much as I could in each entry's memo field
so I could figure out what the hell I did here when I was looking at
these entries 2 or 3 years down the road. :)

Tom Young
 
J

Jay Levitt

As a matter of tax law - of which I'm no expert - I think you could
claim 90% of the loss since 10/100 = 10%.
I did not realize that! I was reading the fairmark.com guide to wash sales
instead of the actual IRS pub, and they never deal with the case where the
lots are different sizes. Argh. Thanks for pointing that big mistake out.
However, we'll stick with
your premise that the full $25 has to be added to the basis of the
3/15/05 purchase.

I did it this way:

Left the 1/1/05 Buy and 3/1/05 Sale alone.

Entered an ABC stock RtrnCapX transaction between the Buy and Sell
dates for $25.
(Doesn't affect cash, results in no gain/loss on 3/1/05 which is the
situation for tax purposes, if not GAAP purposes.)
Makes sense. I'm just editing the Schedule D output manually in Excel,
which accomplishes the same thing for tax purposes.
Added the 10 shares of ABC @ $10/sh on 3/15/05 with a lot date of
1/1/05

Entered an ABC stock RtrnCapX transaction on 3/15/05 for ($25).
(Doesn't affect cash, adds to $100 actual cost basis of new 10 shares.)
Ah! Right, that RtrnCap needs to be negative. I discovered that when I
found that selling a lot with a negative cost basis does verrry interesting
things in Quicken.
Did an XOut transaction of $100 on 3/15/05.
(Gets cash in account correct for 3/15/05 purchase, doesn't show up on
a Income/Expense report.)
Perfect. I'll use XOut instead of MiscExp, which (turns out) affects the
cost basis.

And yes, I'm commenting heavily on each of these, plus saving the Excel
file which contains a list of wash sales...

Thanks a bunch for the pointers.

Jay
 
J

Jay Levitt

Did an XOut transaction of $100 on 3/15/05.
(Gets cash in account correct for 3/15/05 purchase, doesn't show up on
a Income/Expense report.)
When I'm buying more shares than are involved in the wash, do you see any
harm in moving this into the commission field of the remaining Buy
transaction? It's a nice easy thing to do, since Quicken will
automatically update that field for you as soon as you drop the number of
shares.

Also, how'd you do an XOut without a transfer-to account? Q07 won't allow
me to do that.

Jay Levitt
 
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T

TomYoung

Jay said:
When I'm buying more shares than are involved in the wash, do you see any
harm in moving this into the commission field of the remaining Buy
transaction? It's a nice easy thing to do, since Quicken will
automatically update that field for you as soon as you drop the number of
shares.

Also, how'd you do an XOut without a transfer-to account? Q07 won't allow
me to do that.

Jay Levitt
I rarely visit this group, hence the delay in replying.

I'm not really following your first question so I'll pass on attempting
an answer.

As for the second question, I'm using Quicken 2004 Deluxe (heck, I'd
still be using Quicken 199X if Quicken didn't force me to upgrade just
to get automatic quotes) so the process is to initiate a "Cash
Transferred out of Account" transaction then make the "Transfer
Account" (the account receiving the cash) the same account as the one
you're in. The effect of such a transaction - and Quicken has been
consistent in its application for as long as I can remember - is a
reduction in cash in the transferring account and a reduction in net
worth, i.e.,:

Debit Net Worth $100
(Reduction)

Credit Brokerage Account Cash $100
(Reduction)

Without having Q2007 installed I'm not sure exactly how you'd do it in
that version, but I'd guess that it *can* be done.

Tom Young
 

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