I buy stock ABCD in several lots over many years. Because of the timing, some have gains and some have losses.

Yesterday, I picked all the lots that have a loss and also pick out a few lots that have gains so that they roughly cancel out.

The sale results in $x,000.

Next week, I buy more stock ABCD.

Is this a wash sale considering had many lots of the same stock with losses and gains and I buy more of the same ticker a few days later?

I believe so. Pretty sure the selling of each lot are still considered separate sells, and the lots you sold at a loss would be subject to the wash sale.

Yes

Correct. The losses get built into the cost basis of the new shares. You'll owe tax on the profits you took.

Brian Earl Spilner said:

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Correct. The losses get built into the cost basis of the new shares. You'll owe tax on the profits you took.

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The losses and gains cancel out so I see the overall profit is just $33. So tax on that is negligible.

However, I was hoping to buy the same stock again with the funds now released but from the responses it seems like it is a wash sale. So I guess it means that if I end up buying the same ticker, I cannot cancel and so the calculation is no longer resulting in $33 but a much larger number since there is nothing to cancel with. Does that sound right?

That's right. Your $33 will become all the profit from the green lots.

You don't really lose the losses forever, they're just carried over to your new shares. Whenever you end up selling them, you'll take a "smaller" profit as far as taxes are concerned.

But you do lose those losses for this tax year.

Brian Earl Spilner said:

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That's right. Your $33 will become all the profit from the green lots.

You don't really lose the losses forever, they're just carried over to your new shares. Whenever you end up selling them, you'll take a "smaller" profit as far as taxes are concerned.

But you do lose those losses for this tax year.

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OK.. got it... The gains and losses are around $18k each which cancel out now but otherwise I'd be paying taxes on 18k but carry over the loss of 18k over 6 years as I can carry over only 3k at a time. 6 years is too long for me.

I was going to make the purchase on Friday but got delayed with something and put it off. Luckily I remembered this wash sale situation and thought I'd ask here.

Thanks all, for your awesome responses.

You only have to worry about the $3k loss carryover if your net P/L is a loss of over $3k for any given year.

So if you don't rebuy more shares, you will actually be able to just report the $33 profit and owe tax on just that.

Or in subsequent years, take that full loss to cancel out as much gains as you're able to.

Also, you do have the option of buying a smaller position than you sold. For instance, say you sold 100 shares and repurchased 50, you'd only lose a portion of the losses.

In your position, I'd look at how much you're willing to pay taxes on this year, and purchase some shares back by that metric.

Like say you're willing to pay tax on $5k gains this year, just add up your biggest losing lots, see how many shares add up to -$5k in losses, and repurchase that many shares.

Brian Earl Spilner said:

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You only have to worry about the $3k loss carryover if your net P/L is a loss of over $3k for any given year.

So if you don't rebuy more shares, you will actually be able to just report the $33 profit and owe tax on just that.

Or in subsequent years, take that full loss to cancel out as much gains as you're able to.

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Yes, so if I don't buy ABCD again, then I have a profit of 18033 - 18000 = $33.
But if I buy ABCD again within 30 days, then I cannot use the 18k to cancel out the 18033 so I will pay the taxes on 18033 and then use 3k against other gains for 6 more years (totaling 18k), isn't that right?

Or will I be able to use the 3k in my 2024 taxes and if I have gains of 15k in 2024, I can use the remaining 15k to create a net gain of $0 so no taxes to be paid.

Which one is it?

You can use all $15k in 2024. As long as you're never reporting a net loss on the year of greater than -$3k, you're good.

Brian Earl Spilner said:

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You can use all $15k in 2024. As long as you're never reporting a net loss on the year of greater than -$3k, you're good.

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OK! This is news to me! In the past I have dragged out 9k over 3 years (I am a DIY type). Thanks for the information!

Don't want to start another thread but had another question.

If I've been buying up apple bi weekly for years, but want to sell 49 shares purchased with extra money that I now need( but that purchase of 49 shares was over a year ago) will that negate the long term hold of over a year since I purchase the stock biweekly as well?

Quacked said:

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Don't want to start another thread but had another question.

If I've been buying up apple bi weekly for years, but want to sell 49 shares purchased with extra money that I now need( but that purchase of 49 shares was over a year ago) will that negate the long term hold of over a year since I purchase the stock biweekly as well?

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No, just need to only be selling shares purchased over a year ago and nothing sooner than that. Believe this is the default buy/sell setting for accounts.

Chipotlemonger said:

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Quacked said:

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Don't want to start another thread but had another question.

If I've been buying up apple bi weekly for years, but want to sell 49 shares purchased with extra money that I now need( but that purchase of 49 shares was over a year ago) will that negate the long term hold of over a year since I purchase the stock biweekly as well?

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No, just need to only be selling shares purchased over a year ago and nothing sooner than that. Believe this is the default buy/sell setting for accounts.

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Yes I would assume your default is going to be FIFO - First in First Out. Depending on how long you've been doing this, that may be a very bad thing tax wise considering Apple's rise over the past (insert any time frame number of years here).

If you are trying to minimize taxes but still get a long term capital gain, looks like mid-august and early april last year were the recent peaks, so should have the highest cost basis there around those points if you were buying bi-weekly - still considered long term since both were more than a year ago. You should be able to pick the specific lots you want to sell

Pretty sure default is losses first, no? I know it is on Schwab.

By default it'll take short term losses first, then long term losses, then long term gains, and finally short term gains. (The highest tax bracket.)

Brian Earl Spilner said:

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Pretty sure default is losses first, no? I know it is on Schwab.

By default it'll take short term losses first, then long term losses, then long term gains, and finally short term gains. (The highest tax bracket.)

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May depend on account (and maybe I set this up myself at some point) - but I have a brokerage account at Schwab and Fidelity and they both say default disposal method is FIFO. I nearly always manually do specific share identification when doing sells in taxable accounts, however.

Followup questions.

1. What if I have 2 different accounts with different accounts in different brokers like Schwab and Fidelity. If I sell at Schwab for tax harvesting, can I buy at Fidelity in a day?

2. What if I sell for tax harvesting on my account but buy the same stock from my wife's account the next day? (filing jointly)

Good call. I vaguely remember changing my default when I first set up the account.

I recommend setting to Tax Lot Optimizer and never thinking about it again.

infinity ag said:

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Followup questions.

1. What if I have 2 different accounts with different accounts in different brokers like Schwab and Fidelity. If I sell at Schwab for tax harvesting, can I buy at Fidelity in a day?

2. What if I sell for tax harvesting on my account but buy the same stock from my wife's account the next day? (filing jointly)

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1 is a wash sale for sure, though you'd be responsible for calculating the prohibited loss yourself when you submit your tax return. Best to just avoid.

Not 100% sure on 2, but fairly sure that would also trigger a wash sale.

infinity ag said:

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Followup questions.

1. What if I have 2 different accounts with different accounts in different brokers like Schwab and Fidelity. If I sell at Schwab for tax harvesting, can I buy at Fidelity in a day?

2. What if I sell for tax harvesting on my account but buy the same stock from my wife's account the next day? (filing jointly)

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1. You can buy, but would lose the tax harvest aspect. It would be a wash sale, or should be reported as such.

2. I think that workaround is a no-no.

*I am not a financial expert but what you're thinking about doing here are scenarios that have long been regulated. If it were that easy to not pay taxes, more people would be doing it.

If you're really set on putting your money back in, I'd just look for the closest alternative.

For instance, if it's an index fund, get a close equivalent. (VOO for SPY, etc.)

Similarly, if it was one stock, try to find an ETF with heavy exposure to that particular stock or industry.

Brian Earl Spilner said:

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If you're really set on putting your money back in, I'd just look for the closest alternative.

For instance, if it's an index fund, get a close equivalent. (VOO for SPY, etc.)

Similarly, if it was one stock, try to find an ETF with heavy exposure to that particular stock or industry.

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I think the wash rule description says that if any investment is close, then it is not allowed too. It is wishy-washy.

https://www.investopedia.com/terms/w/washsale.asp

Quote:

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What Is a Wash Sale?

A wash sale is a transaction in which an investor sells or trades a security at a loss and purchases "a substantially similar one" 30 days before or 30 days after the sale.1 This is a rule enacted by the Internal Revenue Service (IRS) to prevent investors from using capital losses to their advantage at tax time.

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infinity ag said:

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Brian Earl Spilner said:

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If you're really set on putting your money back in, I'd just look for the closest alternative.

For instance, if it's an index fund, get a close equivalent. (VOO for SPY, etc.)

Similarly, if it was one stock, try to find an ETF with heavy exposure to that particular stock or industry.

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I think the wash rule description says that if any investment is close, then it is not allowed too. It is wishy-washy.

https://www.investopedia.com/terms/w/washsale.asp

Quote:

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What Is a Wash Sale?

A wash sale is a transaction in which an investor sells or trades a security at a loss and purchases "a substantially similar one" 30 days before or 30 days after the sale.1 This is a rule enacted by the Internal Revenue Service (IRS) to prevent investors from using capital losses to their advantage at tax time.

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This us true, there does have to be some kind of difference. I am not sure if there is a technical boundary for what is sufficient enough however. May be buried in tax code somewhere?

Betterment has some good information on correlated funds they'll TLH between. Not sure if available unless you're already a customer there. I bet some information can be found online through Bogleheads or something like that.