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Wash Sale


Christian

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I have been a stock investor since 1965. I do not engage in short term stock trading and have studiously avoided wash sales. This year an individual came in and to my utter astonishment presented me with a single brokerage account in which he traded over $5,400,000.00 in securities (all single stock trades). In looking at the yearly total I found he had lost some $5,441.00 for the entire year or so I thought. He had some $38,000 in disallowed wash sales and was left with a slightly lesser amount amount of taxable short term gains. He had made some profitable trades and basically ended up paying tax on those and losing virtually all the offsetting losses to wash sale rules. What the heck did they do with those losses as I see they are not retained for deduction in follow on years ? Is there no recovery for these ? His trades were all in the same securities meaning he traded the identical stock multiple times in the same 30 day period.  

 

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OIC. So if he sells the security at a later loss it will increase his loss or if a profit decrease his gain. Of course, as he had to cough up over $11,000 on those sale gains he lacked appreciation of this fact. Good grief the next question is does his broker recalculate  the basis on those shares?

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I once had a client who was a broker with over 4400 trades, most of them wash sales. I charged him a bundle to create a spreadsheet to "move" each unallowed loss to the adjusted basis of the next purchase. After a couple years, his wife quit funding his trading. His only income was his own commissions, because he spent all his time on his own account.

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About 2 years ago a guy freaked out that his wife had about $100 in wash sales from Fidelity. Someone it was my fault and I needed to monitor her trading. I have absolutely nothing to do with her account and he couldn't really figure out how I would monitor it.

 

Have a new client this year who admits he has day traded for years and has a massive loss that carries over every year. $125k I think and he literally has less than that in total net worth from what I can tell.

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