Wash Sales Calculation 30 Day Window
Posted by Henry Gage on 23 March 2010 03:17 AM
Regarding: Wash Sales Calculation 30 Day Window

This is a religious question and one where we choose not to throw any stones at how another product calculates wash sales. In this case we disagree however. Here is why...

In your example, on 01/24/2008 a position is opened short and then close on the same day at a profit of $0.93. This means it was acquired an disposed of which means it is not open. This means it is history an not subject to adjustments. The gain/loss for the tax lot is positive so it is not at risk of a wash adjustment. It is closed so it is not at risk of a basis adjustment as a result of it washing another trade that closed at a loss within 30 days. Wash sales does not apply to this position.

On 02/01/2008 a position is opened short and then closed on the same day at a loss of $67.06. As of this day the tax lot is a candidate for receiving a wash sale adjustment. However there are no "not grouped" trades within the 30 day window.

For a moment let's assume that closed trades could cause a wash adjustment. This means they are reopened and the gain/loss is recalculated, which could result in positions that closed at a gain now closing at a loss and becoming a candidate for a wash sale adjustment by another trade within 30 days. This means you could go back through time and reopen a list of closed trades and create new wash adjustments with no beginning in sight. This means you could find a need to restate prior year gains.

Here is the implication of this translation. If you can go back in time and change gains to losses by a trade in the present then a large loss in the present could reverse gains from a prior period. This is the opposite of the spirit of the rule. They don't want you to hide gains by showing present losses. They want to see your gains so you can pay taxes on the gain, not wipe out prior gains resulting in a larger refund. The wash sale rule prevent showing a loss in the present and then holding positions with built in gains. People were selling on 12/31/YYYY at a loss then buying on 01/01/(YYYY+1)

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