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Posted by ed on February 7, 2007, 8:46 pm
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> I posted this on misc.invest.stocks and it was suggested
> that i ask here:
>
> if i have a loss on a daytrade but had a gain on another
> daytrade of the same stock less than 30 days prior do i
> "wash" the loss into the cost of the earlier trade? seems
> stupid to wash a loss into a position that's already closed
> but the way the rule reads it looks like that's how it's
> supposed to be reported.
>
> to make this more clear, here's what happened:
>
> 2/22/06 gain of $418
> 3/06/06 loss of $172
>
> i believe the proper way to report is to add $172 to cost
> for 2/22/06 such that gain is only $246 and make 3/06/06 a
> wash sale.
>
> this was one of the replies:
>> "The wash sale rules really only apply when the transactions
>> bridge two tax years. You can trade all you want throughout
>> the year, but if you close out your position prior to the end
>> of the tax year and stay out for the required period of time,
>> the wash sale issues are really not important."
> from:http://www.fool.com/taxes/2000/taxes001006.htm
>
> ** the problem i have is that the IRS doesn't indicate
> anything similar to the above quote in publication 550
> (where it defines wash sales) so are traders required to
> report wash sales within the year (even if they have no
> carry-over) or can they just be reported as losses when they
> occur. obviously it would be much simpler to do the latter
> and the tax liability would be the same.
You are looking at the *closing date* of the prior gain
transaction. The thing that triggers a wash sale is the
initiating of an open position, so when that stock was
*bought* must be within 30 days of the sale of the possible
wash sale.
Since you called them *day trades* perhaps the purchase was
within the 30 days. If so, the reason you can ignore it
and you'll never find a rule saying so, is that it makes no
TAX difference whether you report it or not. IF the IRS
should challenge you there can be no penalty because there
is no tax difference. Because of that you need not look at
closed posititions for the triggers to wash sales.
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