Is this actually a wash sale?
Summary:
- The main problem reported is the complexity of wash sales and their tax implications for traders, particularly regarding the realization of losses and subsequent purchases of substantially identical securities.
- To understand wash sales, users are advised to review IRS definitions and rules, including the permanent adjustment of cost basis for purchased shares when a wash sale occurs.
- Users can check their wash sales and adjusted cost basis by visiting the closed positions page and positions page on Fidelity.com.
- For detailed guidance on wash sales, users are encouraged to consult IRS Publication 550.
- If users have further questions or concerns after reviewing their information, they can reach out through Fidelity’s social media channels for assistance in a secure environment.
Here’s the full thread
Hello there, @Vita. Thanks for visiting our Discord. I’m happy to provide some insight into wash sales.
To start us off, it’s important to know that wash sales can be complex, and traders need to recognize these transactions and the tax ramifications.
First, what is a wash sale? Well, the IRS defines a wash sale as a sale or other disposition of stock or securities on which the seller realized a loss within a 61-day period (beginning 30 days before and ending 30 days after the date such sale or disposition took place) and replaces it with stock or securities that are “substantially identical.” More specifically, the wash-sale rule states that the tax loss will be disallowed if you buy the same security, a contract or option to buy the security, or a substantially identical security.
Wash Sale Rule: https://www.fidelity.com/learning-center/personal-finance/wash-sales-rules-tax
When a wash sale occurs, all or a portion of any loss realized at the time of the sale may be disallowed. The amount of the disallowed loss will automatically be added to the cost basis for the purchased shares. This cost basis adjustment is permanent for shares and does not go away. To view wash sales and any adjusted cost basis on Fidelity.com, you can visit both your closed positions page and your positions page, depending on the situation.
Check out IRS Publication 550 for more information on wash sales.
IRS Publication 550: https://www.irs.gov/publications/p550#en_US_2021_publink100010601 (1/2)
It’s worth mentioning that it is possible to sell a position for a net gain and still incur a wash sale when you re-enter it within 30 days. If you had at least one tax lot that was sold at a loss, you will have a wash sale when you buy back in. You can review the gain/loss by tax lot for your closed positions on our website (login required):
1. Select “Accounts & Trade” and from the dropdown, select “Account Positions”
2. Click “Closed Positions” above “Overview”
3. Click the small “+” next to the ticker symbol to expand all tax lots for the position
If after you’ve gone over everything, something still doesn’t seem right, please connect with us on our other social media channels, such as Reddit, Facebook, X, or Google Business Messages. We’d be happy to take a closer look in a secure environment.
Thanks again for being an active member of this community. (2/2) 🟢