Wash Sale Adjustment

[tj4ice]

I'm looking at the capital gains report and have a question on the wash sale adjustments. Let me use an example.

I bought stock XYZ

50sh on 11/13/07
50sh on 11/16/07
25sh on 1 /16/08
25sh on 2/6/08
50sh on 3/13/08

I sold my whole 200sh position on 3/24/08. The lots purchased on 1/16 and 3/13 were losses. The other lots purchased were for gains. I did not enter this position again unitl 6/27/08, past the 30day window. In the past when I have done my taxes I would leave this transaction as is since I did not hold any shares on the date I sold and did not re-enter within 30days.

The Capital Gains report is making wash sale adjustments. It is taking the loss on the lot of 1/16 and adjusting the cost basis for the lot bought on 3/13. The net result is the same as if I would just leave the transaction as is with no wash sale adjustment.

My question is, if I sold the whole position on 3/24 and did not re-enter within 30days is this wash sale adjustment necessary? Just curious if I have been doing my adjustments wrong in the past even though the net reporting is the same. BTW, this is an easy example I have other positions were I had multiple buy dates as above, sold the whole position and did re-enter within 30days. Following the wash-sale adjustment become a task.

[Mark]

Hi tj4ice,

Technically speaking, the shares purchased on 3/13 are 'replacement' shares, since they were purchased within 30 days of your sell on 3/24. They are replacing the 1/16 purchased shares you sold at a loss on 3/24.

Since these replacement shares were also sold on 3/24, it comes out the same as if you didn't identify these shares as replacement shares in the first place.

Fund Manager is being technically correct. I'm not a tax professional, and can't give tax advice, but it makes sense that the taxing authority would accept either reporting method, since the final result is the same amount of tax.

I have a feeling I haven't told you anything you didn't already know... If you'd like to research this more, there are a couple of links in our documentation to some sites with good wash sale information:

http://www.fundmanagersoftware.com/help/washsales.html