Wash sale?

[Roland Slugg]

Taxpayer purchases 1,000 shares of common stock of X Corp on May 20, 2016 for $25 per share. On June 15, 2016 he sells 250 of those shares for $20 a share, resulting in a loss of $1,250. He has no other purchases or sales of Corp X shares in 2016.

Is the $1,250 loss deductible, or is it a wash sale?

If you can, please cite a specific reference to the Code or Regs in support of your answer.

[mastertaxguy]

Non Wash sale

1. Code Sec. 1091
2. TTB 6-10, left column, middle of the page.

[FEDUKE404]

No wash here

Why would you ever think (with the facts presented) that a wash sale was possibly involved?

Absent other facts unknown to us, it is a simple short term capital loss.

Caveat: If older shares of X Corp were in play, then you likely need to consider FIFO issues which might impact the accuracy of the answer above.

(Suggest you review definition of "wash sale" also.)

FE

[Snaggletooth]

You're Kidding

If there was not a repurchase of shares from this company within 45 days, that throws a dagger into the heart of any possibility of a "wash" sale.

Surely you knew this...Were you just throwing the question out to see what kind of response you would get?

[Lion]

Quick Answer - For federal tax purposes, a sale of stock or securities and a purchase of substantially identical stock or securities within a 61-day period beginning 30 days before and ending 30 days after the sale. Code Sec. 1091. Losses are not deductible except from dealer transactions. See U.S. Master Tax Guide ¶1935.

[FEDUKE404]

Wash some more

If there was not a repurchase of shares from this company within 45 days, that throws a dagger into the heart of any possibility of a "wash" sale.

Surely you knew this...Were you just throwing the question out to see what kind of response you would get?

Well, the time frame for impacting purchases is 30 days BEFORE the sale for a loss and 30 days AFTER the sale for a loss.

At one time figuring out wash sales was not an enjoyable experience. (My guess is many wash sales were. . ."overlooked.") Computer software eventually took most of the sting out of the Schedule D reporting, and now with all stock purchases "covered" the brokerage firms do an excellent job of catching the wash sales and showing the necessary information on the Form 1099.

If you input things properly, on the Form 8949 you should see a "W" in column F and a dollar amount in column G.

FE

[Snaggletooth]

Before and After

Well shows how much I know after lo this many years. The "Before and After" is like a mystery word on "Wheel of Fortune." Sluggo, you got me...

[Maribeth]

It is not a wash sale. There would have to be another purchase of substantially identical stock within the 60 day window of the sale in order to trigger the wash sale rules.

[FEDUKE404]

Echo echo

It is not a wash sale. There would have to be another purchase of substantially identical stock within the 60 day window of the sale in order to trigger the wash sale rules.

I believe Snaggletooth made the same observation you are making, but on March 16th.

You might always care to review the thread and first see what other comments have already been posted?

FE

[Rapid Robert]

I believe Snaggletooth made the same observation you are making, but on March 16th.

You might always care to review the thread and first see what other comments have already been posted?

FE

A review of this thread is just more confusing, especially when at least one person has given two answers, one of which directly contradicts the other. Then we have people who point to a page in TTB explaining it is a wash, but they label their answer "Non wash". And where did "45 days" come from????

Yes, it's a wash sale.

[FEDUKE404]

Facts so far do not support a wash sale event

A review of this thread is just more confusing, especially when at least one person has given two answers, one of which directly contradicts the other. Then we have people who point to a page in TTB explaining it is a wash, but they label their answer "Non wash". And where did "45 days" come from????

Yes, it's a wash sale.

Disagree. With the facts presented, it is simply a short term capital loss. Those facts, alone, are not indicative of a wash sale.

It **COULD** be a wash sale if other purchases of the same stock were made within the +/- 30-day window.

No one has clarified those important details.

And, as I mentioned earlier, since this is obviously a recent stock purchase/sale event, the cost basis WOULD be "covered" and, rest assured, the brokerage firm would have already flagged things as a wash sale on the 2016 Forms 1099-B information.

FE

[Rapid Robert]

Disagree. With the facts presented, it is simply a short term capital loss. Those facts, alone, are not indicative of a wash sale.

It **COULD** be a wash sale if other purchases of the same stock were made within the +/- 30-day window.

No one has clarified those important details.
FE

The detail was very clear up front. 750 "OTHER" shares were indeed purchased within 30 days before the sale of the 250 shares.

This is exactly what TTB refers to as the reason for the wash sale rules. This investor purchased something, now the value has gone down. He doesn't really want to get out of his position in the security, but by "shuffling some papers" he wants to lock in a current loss strictly for tax purposes, no other reason. It's safe to say that if he is a rational investor, he does not expect the remaining 750 shares he holds to continue to go down, he expects them to go back up or he wouldn't continue to hold them.

[FEDUKE404]

Wash sale is not invoked by mere sale of stock at a loss

The detail was very clear up front. 750 "OTHER" shares were indeed purchased within 30 days before the sale of the 250 shares.

This is exactly what TTB refers to as the reason for the wash sale rules. This investor purchased something, now the value has gone down. He doesn't really want to get out of his position in the security, but by "shuffling some papers" he wants to lock in a current loss strictly for tax purposes, no other reason. It's safe to say that if he is a rational investor, he does not expect the remaining 750 shares he holds to continue to go down, he expects them to go back up or he wouldn't continue to hold them.

One of us is extremely confused here.

This is from the original post: "Taxpayer purchases 1,000 shares of common stock of X Corp on May 20, 2016 for $25 per share. On June 15, 2016 he sells 250 of those shares for $20 a share, resulting in a loss of $1,250. He has no other purchases or sales of Corp X shares in 2016."

SO WHAT if 750 additional shares were originally purchased? ? ? ? ? ?
Hint: We are talking about WASH SALE rules.

Of the original 1,000 shares, he could have sold all or none and there still would never be a wash sale situation in existence, UNLESS within the +/- 30-day window he "purchased identical shares" of the same stock. (OP seems to indicate a SINGLE purchase on ONE DATE at the SAME PRICE.) Along a similar line, the guy could wait 32 days after the sale of the 250 shares sold at a loss, buy some more shares, and there would also be no wash sale consideration.

Unless this dude REPURCHASES some shares of the same stock within the block-out period, he can sell some/all of the original shares, take the tax loss as a "normal" Schedule D transaction, and move on. No paper shuffling involved.

FE

[Rapid Robert]

One of us is extremely confused here.

No, neither one of us is confused, I think we both know exactly what the other is saying. Your opinion/interpretation is shared by a commentator at www.fairmark.com, a well regarded investment site.

http://www.fairmark.com/capgain/wash/wsreplac.htm

(I am posting this link as I don't believe the site is a competitor to TaxMaterials Inc, but if the moderator disagrees, so be it).

The disagreement is, both you and the Fairmark commentator are using the word or concept of REPLACEMENT stock. He comes right out and says it: "You don't have a wash sale unless the shares you bought "replace" the shares you sold."

The problem I have with that is neither the code nor the regulations use the word "REPLACE" or anything similar. They simply mention acquiring stock. To me, an acquisition is an acquisition is an acquisition, whether it "replaces" something or not. In fact, the concept of "REPLACE" completely falls apart when you look at the 30 days prior to the wash sale -- how can one "REPLACE" something in advance of selling it?

The Fairmark article also claims the IRS agrees, but provides no support or citations whatsoever for this claim.

So, you have an interpretation of the law that I don't agree with. My argument is that you are inserting the meaning "REPLACE" when the law uses no such language. Do you have any authority for interpreting the concept of REPLACEMENT into the law?

[Burke]

This is not a wash sale. For it to be classified as such, substantially the same stock sold (i.e, 25 shares of XXX stock) would have to have been subsequently repurchased within the 30-day time frame of the original sale. You are considering the original purchase as replacement stock. It is not. He has a deductible short term loss of $1,250.