if ur not mtm, do u really have to stop

Discussion in 'Professional Trading' started by howardy2k, Jan 1, 2004.

  1. trading for 30days to bypass the washsale rule. I trade the same stock hundreds, even thousand of times over the course of a year.

  2. Hi Howardy2k:

    I don't want to have to deliver bad news, but the rule is the rule. There are two ways to get out of the wash sale rule for stocks, and you've identified both of them. One way out is to elect MTM accounting. The other way is to get outside the wash sale window, i.e. 30 days on either side of the trade.

    The only good news here is to understand that the wash sale rule does not disallow recognition of the losses forever, rather it simply defers such recognition. The deferral is accomplished by adjusting the basis of the replacement stock, i.e., raising the basis by the amount of the loss that was not recognized.

    So when you eventually get around to a sale outside the wash sale window, you will have less taxable gain than you otherwise would have had. At that point the accumulated losses are factored into the adjusted basis, thus reducing your gain recognized. So at that point you get full tax benefit [if that is the word] of the captive losses you were unable to recognize along the way.