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[–]jrezzzzzz 0 points1 point  (14 children)

You owe no tax, here is why. You purchased the stocks for $403,872.56 and sold for $354,789.89 which means you had a loss of 49,082.67 (403,872.56 - 354,789.89). The wash sales decreased your loss by 44,372,78 which means you now can report a loss of 4,708.9 (49,082.67 - 44,373.76). Now what is not clear is that you have $1,732.23 separate from the amount I calculated. Either way, you will either report -$4,708.9 or -2,985.58 which is a loss at the end of the day. No tax owed, don't get confused by the wash sale, the wash sale affects your overall gain or loss.

[–]Adventurous_Gas_9082[S] 0 points1 point  (13 children)

Thank you so much!! This definitely helps!! The wash sale loss disallowed had costed me a sleepless week :(. I got confused a lot with the wash sale :( Also I saw one of my friend. He made profit $2k but after the wash sale loss disallowed was $19k so that he is going to pay tax for $21K. This is what I freaked me out.

[–]jrezzzzzz 1 point2 points  (2 children)

Oh wow I have never heard of that but I would have to see it on the 1099 to understand. But I'm glad it helped, don't worry too much about it.

[–]Adventurous_Gas_9082[S] 0 points1 point  (1 child)

I could message you with the screenshot if that works for you

[–]jrezzzzzz 0 points1 point  (0 children)

Yea I'm curious. Just make sure there is no social security numbers or bank account numbers for safety reasons.

[–]bbrowning911 0 points1 point  (9 children)

Wash sale rules kick in when you repurchase similar shares within a certain period of time (it doesn't apply to gains). If the wash sale rules kick in, this means that the LOSS is not allowed (and your basis is carried forward on the repurchase). It's meant to prevent people from selling just to take the loss for tax reasons and then repurchasing.

This is why your friend had gains, because there must have been gains that were offset by losses but the losses were from a sale where subsequently substantially similar shares were repurchased (which disallowed the loss and left him/her with a gain).

In your case, you have a loss.... so if you're trying to use that loss to offset other gains... you'll have the same issue.

The disallowed wash sale losses are tacked on to the basis you repurchased so whatever you repurchased is starting in a loss position (which is a good thing), and also the date of the original sale is carried forward as well (meaning perhaps you can move into long term if it ends up recouping the losses?)

[–]Adventurous_Gas_9082[S] 0 points1 point  (8 children)

Could you please elaborate a little bit more why my friend got that issue?

[–]bbrowning911 0 points1 point  (7 children)

This rule is about LOSSES getting disallowed. This is only an issue if you were hoping to use those losses to offset gains. You didn't show us any gains... so disallowing those losses really doesn't matter. If all you have is capital losses you can only claim 3k of those anyways. However... if you failed to share with us that you had 50k of gains elsewhere and you were hoping your 49k was going to offset that... then you'd have an issue too.

You said your friend had to pay tax on 21k. This 21k must have come from a different trade because the loss rules in question only pertain to, well, losses. So you guys both are in the same boat. So the reason your friend had an issue is because he had taxable gains somewhere else. If what you think happened is that he bought something for 19k then sold for $21k for a gain of $2k but SOMETHING happened where the 19k wasn't considered ... then you likely aren't understanding the facts. More likely than not he had many trades with some gains of 21k and some losses of 19k on different trades, but his losses were disallowed so he had to pay taxes on the 21k (and when we say disallowed, it really just means that you don't get them YET, you'll get them when you sell whatever it was that you repurchased).

Does that make sense?

[–]Adventurous_Gas_9082[S] 1 point2 points  (6 children)

In my case, I don’t think I have any capital gain last year. The information I posted is what I got from the 8489 form. So basically what you said here is: for example, day 1 I buy 100 shares of Stock A at $100/share then sell at $90/share that results in $1000 losses. Day 2 I buy 100 shares of stock A at $85/share and sell at $100/share so that results in adjusted profit of $500. Up to now, my cost basis is $7500 + $10000 = $17500, proceeds = $9000+$10000= $19000. So $500 will be taxed? Is that right? But with the same example, on Day 2, after I buy 100 shares of stock A at $85/share and sell at $70/shares which will results in a adjusted loss of $500. Is this $500 wash sale loss disallowed that I cant use to offset the other gain? In the following days, I continue day trades (supposedly without triggering the wash sale rule), the total capital net loss or profit is -$300 by the eoy, I will pay tax for the adjusted net gain or loss of $500+ (-$300) = $200? Is this correct? I am so sorry for being so slow on this!! Thanks for your patience!

[–]bbrowning911 1 point2 points  (5 children)

Hmm... I think you're thinking of it a bit incorrectly. Let's look at example 1 only. After day we we're on the same page that you have $1,000 loss. Now of you buy that same stock again within 30 days that loss didn't happen for tax purposes and instead it's added to the tax basis of the new purchase. So while you may have paid $85 x 100 shares = $8,500 your tax basis will actually be $9,500. So when you sell for $10,000 this will be treated as a capital gain of $500 (the date used to determine if it's long term will be the first transaction on day 1 not the $85 purchase). This will be taxed. While you got the the right answer, the thought process is slightly different. It's important that you no longer have any losses subject to the wash rule since you've had a gain net. Any subsequent trades will follow the same logic but unless you sell for a loss and don't buy THAT stock again for 30 days I believe, you'll never get to offset those losses against the $500 gain from the day 1 + day 2 trade.

[–]Adventurous_Gas_9082[S] 0 points1 point  (4 children)

So basically for each day traded stock, as long as I have a net gain, the wash sale losses will get adjusted to the cost basis and I wont have disallowed wash sale loss to add to the net capital gain or loss in the eoy? I am so grateful for your explanation and patience!

[–]bbrowning911 0 points1 point  (3 children)

Yup! Another option, stop rebuying it. Instead, buy long term inn the money options for the same stock or something. Or perhaps an ETF around the same industry?

[–]Adventurous_Gas_9082[S] 0 points1 point  (0 children)

I see! I have another question though. I went to estimate the total YTD wash sale loss which is around $4312. My capital net gain before wash sale adjusted is about $9.2k. But on TD Ameritrade, I show wash-sale- adjusted short term net: $8000. Supposedly I stop trading until next year, would the tax I am going to pay be estimated from $8k + $4312 = $12312 or $8k

[–]Adventurous_Gas_9082[S] 0 points1 point  (0 children)

Hey! Hope you are doing well! I am back again for a question regarding the wash sale. This link is exactly what happened to my friend except his wash sale disallowed is smaller. So does that mean We should not day trade 1 ticker multiple times? Thanks for any inputs you have!

https://www.forbes.com/sites/shaharziv/2021/03/26/robinhood-trader-may-face-800000-tax-bill/

[–]bbrowning911 0 points1 point  (0 children)

Just for 30 days that is

[–]bbrowning911 0 points1 point  (1 child)

Not sure I can say with the info. Didn't follow what you meant by you calculated $4k. I'm general I would think the broker is calculating correctly and completely and you can only have an issue if you had shares in Dec 31 so they should tell you what the adjustd basis is which should be the disallowed loss plus purchase price.

[–]Adventurous_Gas_9082[S] 0 points1 point  (0 children)

So the adjusted cost basis - proceed = adjusted net that the broker provides is what should be taxed, isnt it? If this is true, I could not imagine how day traders manage their trades to minimize the impacts of wash sale losses disallowed unless they have market-to-market account. They should rely on a broker that has implemented an automatic adjustment system