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Taxes: Wash Sale or just bad trading?

post #1 of 4
Thread Starter 
I was reading some wash sale information and I have a question about one particular scenario and if it can be written off or not.

Day 1: Purchase 100 shares of X for $1000.
Day 2: Sell 100 shares of X for $2000 (Stock went up!).
Day 3: Buy 200 shares of X for $2000 (Stock went down, able to buy more shares!).
Day 4: Sell 200 shares of X for $500 (Stock kept on going down, bummer).

I would think that the whole thing would be a capital loss of $500 and the $500 could be written off on your taxes. Since the stock was never purchased again after day 4 it wouldn't be considered a wash?
post #2 of 4
Thread Starter 
I have a another similar scenario if anyone knows what pieces of this fall under the wash rule.

Same scenario with an extra sale at the end:
Day 1: Purchase 100 shares of X for $1000.
Day 2: Sell 100 shares of X for $2000 (Stock went up!).
Day 3: Buy 200 shares of X for $2000 (Stock went down, able to buy more shares!).
Day 4: Sell 200 shares of X for $500 (Stock kept on going down, bummer).
Day 5: Buy 100 shares of X for $250.
Day 6: Sell 100 shares of X for $260.

If no wash rule applies the total capital loss is now $490. How does the wash rule apply here since 100 shares were purchased on day 5 after the big capital loss?
post #3 of 4
In the first set, there is no wash since you never bought back after a losing transaction.

The second post would be considered wash since you bought back after taking a loss
post #4 of 4
Thread Starter 
That makes sense, so now that we have a wash we have to add the cost basis from the "loss" sale over into the replacement sale right? We also can still write off 50% of the capital loss since only 100 replacement shares were bought.

Day 1 we bought 100 shares of X for $1000.
Day 2 we sold for $2000 and have a capital gain of $1000.
Day 3 we bought 200 shares of X for $2000.
Day 4 we have a capital loss of $1500 from 200 shares, but can only write off 50% ($750) because 100 replacement shares are purchased on day 5.
- The loss per share is $7.50

Day 5: Bought 100 shares of X for $250 (cost basis of $2.50)
- Here we can add the loss per share of $7.50 onto the price of the 100 shares. So our actual cost basis is $10.00.
Day 6: Sold 100 shares of X for $260 (cost basis of $10.00 x 100 = $1000)
- This results in a capital loss of $740

So now we can write off $750 and $740 for a total of $1490. So it seems to me that in this scenario you could have just calculated everything up, ignoring wash rules and came to the exact same capital loss.
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