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dillon_smith92

Question

Re: Wash Sale Chain

Forum|Forum|3 years ago
February 6, 2023
1 reply
0 views

@AmyC,

Could you please provide a little more explanation/clarity on your answer; I still do not fully understand the answer?

1 XYZ Option

8/19/22 - 12/16/22

1 XYZ Option

11/16/22 - 12/16/22

*** above two were sold at the same time

1 XYZ Option

12/15/22 - 12/23/22

1 XYZ Option

11/16/22 - 1/30/23

If all substantially similar, what are the wash sales? Thank you.

Add on question - are call options with different strike prices and expiration dates considered "substantially similar" to the IRS?

Your response is greatly appreciated!

God Bless,

M. Dillon Smith

AmyC

Employee

Let me explain more. Let's do an example.

Buy ABC 100 shares for $4,000 - date irrelevant

Sell ABC 100 shares April 1 for $2,000, this could be a $2k loss except

Buy ABC 50 shares April 28 for $1,200

A purchase that is 30 days either side of the sale, you have a wash sale. So the wash is added to the basis and the most recent purchase is your purchase date.

However, only half the shares were purchased. So half is a loss and half is a wash.

Now we have a wash sale of 50 shares with the most recent purchase date, April 28.

Now, basis is $2,200, purchase date is April 28.

Half the shares reported as sold for $1k loss.

Yes call options with different strike prices are substantially similar. Corn is corn is corn. ABC stock is ABC stock. XYZ is XYZ, price is not a factor.

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dillon_smith92Author

@AmyC ,

Yes, I totally understand that example and how the wash sale works; I am having trouble applying it to my specific situation due to the complication on multiple trades. So, if you can help my apply the example to my exact situation, that would help tremendously - thank you for your patient! 😊

This is the info for my situation, if you could run the process with these details, it would rid of any confusion:

Sold 2 XYZ on 12/16/22 (however, different loss amounts, different lots 8/19/22 & 11/16/22)

*** I know buy date is irrelevant for determining IF its a wash, but it has to be considered since they were different lots with different loss amounts, correct?

Bought 1 XYZ on 11/16/22 - sold it on 1/30/23 (at loss)

Bought 1 XYZ on 12/5/22 - sold it on 12/23/22 (at loss)

Anyway, if you could just stop through my situation, the above one, that would be helpful - seems more complicated then the example.

Regardless, this is the last I will bother you with it - thanks again!

M. Dillon Smith

AmyC

Employee

I believe your issue is lots. Lot sizes can vary, usually 100 shares for an option. You will need to match up your shares, like my example.

You asked about similarity earlier. The tax regulations say that if two different stocks are linked together in such a way that any change in the price of one will be reflected in the price of another, they're likely to be treated as substantially identical securities for purposes of the wash sale rule. Which is why I said corn is corn. The price affects all of your investment.

I can pretend each lot is typical 100 shares but I don't believe so based on your comments.

So, 2 lots sold 12/16. For clarity:

8/19 purchase becomes a wash since you bought more of the stock on 11/16, within 30 days of selling. Add this sale to that one.
The 11/16 becomes a wash since you bought more 12/5, within 30 days of selling. Add this to the 12/5 purchase.

Sold 1/30/23 - more than 30 days after last purchase or sale, if another purchase does not occur during 30 days either side, you will have a gain or loss on your return

Sold 12/23 - wash sale since not more than 30 days from last purchase, 12/5

No bother, just trying to get on the same page! I hope this has helped.

Maybe directions and information straight from the IRS, please go to Pub 550 and read through the wash sales. You can do control F and search for wash. In addition, you have crossed years within the 30 day rule.

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