understand wash sale

Discussion in 'Taxes and Accounting' started by happy trading, Apr 6, 2021 at 11:43 PM.

  1. i know this was probably discussed here many times but please bear with me and help me understand.
    right now i do not currently day trade. before i possibly embark on such a hard journey i want to clarrify exactly what happens if i only trade one stock such as the spy and after 100 trades in one day, i am at break even. to make things simple let us say on 50 of the trades i lose 1 dollar for a loss of 50. and on the next 50 trades i make 1 dollar a trade, for a gain of 50. now i am back to break even. do i owe money on tazes because i gained or simce i am back to break even i am scott free?
    if i do not owe any taxes what would be a scenario that it seems like is possible that even though overall i did not net any money and maybe even lost money i would still owe taxes?
     
  2. RedSun

    RedSun

    If you trade often, you can declare yourself as a trader, not an investor. So your trading gain and loss offset. Do not recall what the procedure is, but it is not hard.
     
  3. kroxobor

    kroxobor

    If you would pay tax on every trade irrespective of the outcome, then there would be double tax issue, since your loss is someone's else profit and clearly he has to pay tax on his profits.
     
    Flynrider likes this.
  4. VicBee

    VicBee

    The requirements are quite stringent so no, it's hard.
     
  5. VicBee

    VicBee

    If I were you I'd look online for the answer because the answers you will get here are going to be anything but clear.
     
  6. RedSun

    RedSun

    It can be hard for some people, not for some others.
     
  7. lindq

    lindq

    It is difficult for anyone to obtain and maintain trader tax status with the IRS.
     
  8. VicBee

    VicBee

    Yeah but it's not hard for him because he says so.
     
    lindq likes this.
  9. lindq

    lindq

    The basic intent of the IRS wash-sale rule is to discourage investors from selling losing stocks at the end of the year in order to book a loss, then immediately buy back the same, or a similar investment. This will be an issue for you if you sell an instrument in December, then buy it back within 30 days in January. So just find a way to work around that 30 day period, or be prepared in the unlikely event that the IRS questions it.
     
    Option_Attack and comagnum like this.