Wash Sale Replacement Stock Sale Timing

[Abby0510]

Please.. how to pin down the particular sale transaction in which "replacement stock" is considered to be sold. We have periodic purchases and sales of the same company's stock during the year (employer's stock). I know that the replacement stock (bought within 30 days, etc.) cost is increased by the disallowed wash sale loss, and that the holding period of that replacement stock becomes that of the stock sold in the wash sale. We've followed a FIFO timing rhythm on sales... Does the replacement stock also essentially adopt the acquisition date of the shares sold in the disallowed wash sale, so that they would be considered sold in the next sale transaction?

[Rapid Robert]

I guess you are asking about the subtle difference between "acquisition date" and "holding period". I don't have a final answer, because the concepts are not clearly spelled out in the pubs, and I won't be sifting through the code and regs at this time -- since pubs usually reflect the language of the law, even if on rare occasions they don't.

"Your holding period for the new stock or securities includes the holding period of the stock or securities sold." (Pub 550). What does that mean? I don't know. "Holding period" seems to refer specifically to one of two things: short term or long term. Acquisition date is something else, which in your case would determine how to apply FIFO. I don't see anything that says the acquisition date would change, which seems like a basic thing to say if it was part of the law.

Thoughts: you don't have to use FIFO, do you? Why not use specific identification? One of the effects of FIFO is that you are essentially tracking the FMV of the stock in chronological order over time to measure your gains/losses. Using the acquisition date of the stock sold as the acquisition date of the new stock acquired would completely throw this out the window, in that you would be treating stock bought at a recent FMV as if it was bought much earlier in time, when the FMV might have been much different.

[Abby0510]

Thanks, RR, for hearing my question precisely. The transactions I'm debating have already occurred and the broker handled them as FIFO, so as I understand it, I can only impact things going forward. I think I have a 2020 rework and amendment on my plate. Very much appreciate your response.