Wash Sale Deferred Loss, how to recoup

Discussion in 'Taxes and Accounting' started by andyf, Oct 17, 2019.

  1. andyf


    What happens to Wash Sale Deferred Losses if I stop trading the Stock and never trade it again? My Deferred Losses just seem to keep adding up year after year to numbers like 10 times my whole Portfolio Balance....Do I end up paying Taxes on money I didn't really make and the Deferred Losses just sit there forever and I never get to take it against my gain???? For Example I have a ridiculous number of 13 Million dollars showing up as a Deferred Loss in FB but I don't trade FB anymore and I never had anything close to 13 Million dollars in my Account. I have 66K showing up as a Deferred Loss in LYFT but I don't trade that anymore.
  2. traider


    you should have incorporated a company, maybe there is a way to sell your deferred tax losses to another company with profits...
  3. S2007S


    You may have not had $13 million in your account but you probably traded $13 million worth of FB by buying and selling continously. It's easy to do if you are doing round trips of 500 or 1000 shares at a time.
  4. andyf


    You are right since I day traded it for a while continuously buying and selling. But what happens to the built up Wash Sale deferred loss if I stop trading it?
  5. I think it may depend on when you traded. Were some of the trades in Dec, then also in Jan the next year? As far as I know if you buy-sell the same stock over and over, even within the 30 day before/after wash sale time, as long as you are flat by EOY and DON'T trade it again in January, then you just net out gains and losses as usual. This makes sense, maybe, if you consider the IRS washsale rule that the loss basis is added to any new stock purchases. This just nets out gains-losses.

    Not an expert tho, hopefully someone here has better advice.
  6. elt894


    You recoup it when close you your position for at least 30 days. The accounting is unintuitive and can result in large reported wash sales like what you've seen, but they don't actually affect your tax bill.

    Suppose you buy one share for $100 then sell it for $90 for a $10 loss. The next day you rebuy at $90. You've created a $10 wash sale disallowance, but the important point is this also increases your cost basis. Even though you bought the stock for $90, it's reported as $100. Suppose now you sell again at $90 for no gain. You now show a total of $180 in sales against $200 (not $190) in costs with $10 in wash sales. You still have get to report a $10 loss ($180 - 200 + 10).

    Repeat again buying at $90 and selling at $90 and you now have $270 in proceeds, $300 in costs, and $20 in wash sales. Still a $10 loss. Do it 10 times and you'll have $100 in wash sales, but still a $10 reported loss. If you don't close your position by the end of the year you'd only be deferring the $10 loss to the following year, not the full wash amount.
    MoreLeverage and Sig like this.
  7. Sig


    You need a new accountant if you're maintaining these year after year! If you simply stop trading the securities in question 30 days before the end of the year and don't trade them again until Jan 1st you have no wash sale tax issues, it's really that easy. And if you need more detail, @elt894 provides a nice numerical example above.
  8. Sig


    That's not really a thing here in the U.S. at the federal level, there are actually pretty strict rules about even using the tax losses of a company you purchase (with another profitable company), let alone selling tax losses. There are some states where you can purchase tax credits, but again not a thing at the federal level without doing some pretty complex sale/leaseback or equity flip structure at the offset of the tax credit producing operation.
  9. newwurldmn


    You are likely reading the 1099 wrong. I had a similar issue and spent about a few man days working through all my 1099’s for the last seven years.

    In FB, you have differed loss of 13mm, what is your gross gain and what does your taxable gain say?
  10. The great thing is that you can keep carrying that $13 million loss forward and deducting $3k every year! :p Gotta luv US tax code... :banghead:
    #10     Oct 18, 2019
    Scataphagos likes this.