wash sale

[tj88]

I need to determine if the following 2007 transactions are considered wash
sales:

(11/01 Bought 755 sh HOV for $8186)
11/09 Sold 755 sh HOV for $6649

(11/20 Bought 750 sh HOV for $6347)
11/21 Sold 750 sh HOV for $5600

 

[joetaxpayer]

I need to determine if the following 2007 transactions are considered wash
sales:

(11/01 Bought 755 sh HOV for $8186)
11/09 Sold 755 sh HOV for $6649

(11/20 Bought 750 sh HOV for $6347)
11/21 Sold 750 sh HOV for $5600

Did you buy any back before 12/21? If not, you have no wash sale, you
sold both sets of shares you bought.
JOE

 

[removeps-groups]

Did you buy any back before 12/21? If not, you have no wash sale, you
sold both sets of shares you bought.

True, but does he have to report the wash sale regardless? Would the
IRS software would flag his return for manual analysis if he did not?

On my return I would probably write "755 HOV (wash)" and take the loss
for only 5 shares (or maybe zero gain/loss for simplicity), but the
disallowed loss is carried over and added to the cost basis of the
second transaction which is "750 HOV (has wash carryover)" meaning
that the cost basis of the 750 HOV is something like
6347+(8186-6649)=7884.

 

[Rich Carreiro]

I need to determine if the following 2007 transactions are considered wash
sales:

(11/01 Bought 755 sh HOV for $8186)
11/09 Sold 755 sh HOV for $6649

(11/20 Bought 750 sh HOV for $6347)

This makes 750 shares of the 11/9 sale a wash sale.

11/21 Sold 750 sh HOV for $5600

So, the 11/9 sale is the only wash sale. The loss on 750
of those shares is deferred and added to the basis of the 11/20
purchase.

Now, if after the 11/21 sale you stayed out of the stock
for over 30 days (and then didn't do any wash sales in the
closing days of December), you can in effect ignore the
wash sale rule and report the transactions "normally".
This is technically wrong, but will give the same gain/loss/total tax
bottom line as doing it correctly.

 

[s_pickle2001]

This makes 750 shares of the 11/9saleawashsale.


So, the 11/9saleis the onlywashsale.  The loss on 750
of those shares is deferred and added to the basis of the 11/20
purchase.

Now, if after the 11/21saleyou stayed out of the stock
for over 30 days (and then didn't do anywashsales in the
closing days of December), you can in effect ignore thewashsalerule and report the transactions "normally".
This is technically wrong, but will give the same gain/loss/total tax
bottom line as doing it correctly.

Submitting a false return is a crime even if it does not result in tax
deficiency.

 

[joetaxpayer]

Submitting a false return is a crime even if it does not result in tax
deficiency.

That may be true in theory, but in practice there are certain times
logic prevails. I will admit I once had a few shares from a spin-off of
a company. When I went to sell those shares, I lied. I claimed they had
zero basis. It was fraud, and I knew it. In an audit, if they asked how
I had the never to do such a thing, I was ready to state that the choice
to pay tax on the whole $20 those 4 shares were worth made more sense
than to spend even an hour (which I had already wasted) trying to come
up with the true higher basis. Criminal or not, I slept soundly after
filing that return, and the perhaps $2 extra was money well spent.

(Of course there are times not to do such things, but the OP's situation
and mine were not 'frivolous' positions to take. There are times that a
return is simple except for some nominal amount that requires reporting.
One can have the choice between hiring a $500 professional to
disposition that $100, or to assign it a place in the return where it's
subject to the highest rate, ordinary income, and not worry about going
to jail.)

JOE