wash sales one more question

[brtegdbx55]

I have read everything on this board concerning wash sales and have even put it in a word document but still have one question. I buy a stock for 10 dollars, I sell the stock for 1 dollar and I have a wash of 9 dollars. Now if I buy that stock back for 5 dollars does this not have to sell for 9 dollars above 5 dollars to break even.

[Carloseguan]

If you bought it back within the allotted time then yes. Your cost basis will be adjusted the previous wash. So your new cost basis will become 14.00

[Charlesst]

Depends on the time frame. 61 day time frame 30 prior, 30 after. If you bought it back in that window, yes you must add loss into the cost basis of new buy.

100 at $10 = $1000 buy - sell at $1 = $900 loss.
100 at $5 = $500 buy + $900 loss = $1400 cost basis on 100 shares so $14.00 share to technically break even as Aaron said.

Now if you sell at $7 on Dec. 31st for tax loss you can still count the $700 loss AS long as you don't buy it back in January. The rule in place to deter people from selling on Dec. 31st and buying it back on Jan 2nd for tax loss purpose. Tax loss gets wiped out as 'wash'. If you do this in June, who cares because you're probably out by Dec.31st or holding long-term in which case won't matter for taxes that year anyway.

But hey you could always just file mark to market and say FU government.... Then it's just the cumulative gains - losses = income for tax purposes. Wash rule doesn't apply. Of course trading has to be your primary source of income for you to use Mark to Market. Google it. Very similar to those who file as professional gambler on returns (sports bettors usually).

Plus if you file mark to market all your expenses related to trading can be written off. Software costs, subscriptions, tech etc.

[Calvinpync]

The rule in place to deter people from selling on Dec. 31st and buying it back on Jan 2nd for tax loss purpose. Well looks like it would be good if that rule only worked during this time of the year. The way it is now, we are under the penalty all year.

[Catgess]

No, only 30 days. You can buy it back on day 31 without penalty....

But again it really doesn't matter. I mean think about it. Let's say June 1st you lose $900 the first trade, and then June 2nd you make $900 back on the same stock. It's just a wash trade that broke even. No gain or loss for tax purposes or your account. If you trade the same stock everyday all year, you just add up total cost basis and subtract it from total sale proceeds on that same stock to get your final gain or loss on that stock. Ideally you make money and pay the taxes. Besides you can only write off $3,000 max in capital losses. If you're losing much more than that and trying to day-trade, you probably wouldn't last as a trader very long anyway. So when you look at the big picture, it's not really a penalty now is it?

If anything it should help remind you to cut losses quick. You're going to have to pay taxes on what you make anyway, so why not try to accumulate as much as you can before the tax bill arrives?