Question

Stock Wash Sale and ESPP

Forum|Forum|2 years ago
February 27, 2024
1 reply
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Hello,

I'm in a situation that I sold some shares of my company stock, which I acquired originally through ESPP. The 1099-B form I received is reporting capital gains, but after adjusting the cost basis (with the ESPP discount), there is a loss in that transaction. Within the next 30 days of the transaction, I had another vesting of the same stock, which happened to be exceeding the number of shares I sold.

My questions are -

1. The selling price of the stock was between the FMV at my purchase time and my actual paid price. Is my transaction for selling the ESPP stock considered Wash Sale?

2. If #1 is true, the 1099-B form I received did not report this transaction as a Wash Sale, should I manually calculate the disallowed loss?

3. If #1 is true, how should I add the disallowed loss to cost basis of the correct stock purchase transactions? Should I just do this manually in TurboTax in the future when those shares are sold, or request the 1099-B issuer to update their records?

Not A Product Question

M

Mike9241

If you sell your company’s stock at a loss and exercise (purchase) options, receive vested RSUs, or if ESPP shares get purchased on your behalf 30 days before or after the sale, the loss for the number of “replaced” shares will be shifted to the new replacement shares as an increase in basis and not claimed as a loss.

The wash sale applies to all of your assets across the board, including all brokerage and some retirement accounts, including accounts of related parties. Selling an asset at a loss and replacing that asset within 30 days in a different account would still result in a wash sale loss disallowance. Whether the investment custodians (Schwab, TD Ameritrade, Fidelity, etc.) pick up on it and report it as such is a whole other issue.

How Do I Avoid Wash Sales if I Receive Equity Compensation?

Before selling any loss-generating stock, consider when your shares vest, when ESPP shares get purchased, and the timing of ISO or NSO exercises.

Since the wash sale rule is not a total disallowance but a timing difference (you can capture that disallowed loss when selling the replacement asset), consider the entire picture of stock pricing, trading windows, your other capital gains and losses, etc. instead of exclusively chasing maximization of allowed losses.