Applicability of wash sale rules are not limited to a single brokerage or account. They(wash sale rules) are applicable across accounts, different account types, at all brokerages. So yes, the situation could occur.
From where I sit my understanding is that if I closed my account and liquidated everything on Oct. 20 2021 and never traded anything in any account I would still have the same problem, although it would be smaller b/c I would be missing a few trades that are causing me problems toward the end of the year. So in short I would have the same problems, just less of them.
Could someone elaborate on the 60/61 day rule...That gets me confused...With an example please. I have always used the 31 day rule (31 rather than 30 days just to be safe...cleared positions). I have two Roth IRAs (Schwab and Fidelity) my wife has a Roth IRA and we have two trust accounts (Schwab and Fidelity). Just to be safe, I would (example) sell Exxon for a loss at an account at Schwab. I would then wait 31 days (or more) and buy Exxon at Fidelity. Unless the IRS is really looking hard, I don't think they will look for a wash...More the 1099s lining up. OK pros...Answer this one. I sell Exxon (loss) in December and on January 3rd, buy BP and ConocoPhillips (COP). Would the wash come into play???
To further the reducto absurdum, let's assume that this is the only account that the trader has ever had and none of the people he knows trade either. So onward through the fog... "Is there any scenario under which the situation you face could occur to that trader?"
The reducto example has a >60 day buffer both before and after January first of the year during which time the trader nor anyone known to the trader had an account. -Yet the possibility exists for the trader to be subject to wash sale issues? -If so, would that be for trades that occured between e.g. March 8 and October 20 of that year?
A potential explanation I posted before is the broker can report wash sales as they occur and adjust the basis for the next sale. So, if you sold all shares in October and you has a wash sale earlier in the year, the wash sale would be reported on your 1099, but the cost basis would have been increased for your October sale (negating the effect of the wash sale).
That’s right! I have wash sales in my transactions throughout the year. They label a “w” sign on the trades as wash sales. However, the disallowed losses were mostly adjusted to the later trades unless you have wash sales across the end of the year. Then, some disallowed losses would be in the previous trading year but they will be added (adjusted) to the later trades in the next year.
There has GOT to be an app for that. Otherwise, why is not every serious options or stock or etf day-trader not in deep crap every tax cycle? KCalhoun for example. He's in and out a million times an hour. How's he handle this madness? I hope futures continue to stay out of harm's way in this regard. I also hope the clear set of rules (and an App) emerge to be On Top of this BS each and every trading day of the year otherwise trading non-futures looks to have an angle of agony lurking below the surface. Who has solved this puzzle? Tell us more. How do you do it in detail.
I think the complexity lies in the fact that if you keep trading the same stock the wash sale thing goes into a perpetual cycle. For example, if you traded 200 shares of stock syz (trade #1) and took a loss, say from $10/share to $8/share to a total loss of $400. In the next 30 days you traded xyz again for 100 shares (trade #2) in a winning trade. Now the half (100 shares) of the original 200 shares trade (#1) became a wash sale and the $200 loss is disallowed in the original trade. Instead, it is now part of the second 100 shares trade’s (#2) cost basis. If during the 30 days you traded xyz once more in 50 shares (trade#3) and took a loss. Now 50 shares of the original 200 shares trade (#1) became a wash sale and the $100 loss is disallowed in the original trade and added to the cost basis of the 50 shares trade (#3). However, if within 30 days of the 3rd 50 shares trade (#3) you traded xyz again for 100 shares (trade #4). Then the 3rd 50 shares trade (#3) became a wash sale and its loss plus the $100 loss from the original 200 shares trade (#1) is disallowed again, which will be added to the cost basis of the last 100 shares of the xyz trade (#4). If the last 100 shares trade (#4) is a winning trade all is good. But if it’s a losing trade any future xyz trade within next 30 days will trigger a wash sale of that 100 shares trade (#4). You can see this wash sale cycle goes in perpetuity as long as you keep trading xyz and have losing trades. Wash sale rule only applies to losing trades. I am sure brokers use a software to do this wash sale calculations throughout the year. The only way to clear disallowed losses from previous wash sales is to stop trading the same stock for 30 days after a loss (or make sure you only have winning trades within 30 days of the last losing trade ), after which you start fresh again. You cannot clear previous wash sales but they don’t matter either. The disallowed losses matter.