USA Wash sale rule results in ever-increases basis and losses


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Feb 23, 2020
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I read about wash sales in Pub. 550 and thought I understood but there seems to be a paradox, so probably I'm missing something. For example:

02/14/19 Buy 100 shares for $1000
02/16/19 Sell 100 shares for $900

The 2/14/19 purchase was made within the ±30d window of the sale, so this is a wash sale, and the $100 loss is disallowed and added to the basis of the 2/14/19 purchase. Now, with that increased basis:

02/14/19 Buy 100 shares for $1100
02/16/19 Sell 100 shares for $900

Now there's a $200 loss, which should be added to the basis of the 2/14/19 sale. Every time I recalculate, the loss and basis are just going to increase.

What's going on here?
 
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