Is this considered a wash sale/disallowed loss for schedule D?

Question

If I bought and sold a security for a gain and then afterward bought and sold the same security for a loss (within 30 days of having bought and sold for the gain), would the second trade be considered a wash sale and subsequent non-allowable loss for Schedule D?

Anonymous · Accepted Answer

With all due respect to my talented colleague Mr Quinn, in my opinion, the wash sale does NOT apply. 

In general, the wash sale rule prevents you from reporting a loss on the sale of stock if you acquired "substantially similar" stock on the same day as the sale, or within 30 days before or after that day (61 calendar-day total). The wash sale rule, however, does NOT apply if the stock you bought wasn't replacement stock. The purpose of the wash sale rule is to disallow a loss if you RECOVER your position within a short time. 

PS - be sure to choose your "Best Answer" when the time comes. Thank you, in advance, from all of us who take the time to respond.

Disclaimer. The information in this response is for general purposes only, and shall not be construed as specific tax, legal, or investment advice for any individual. The questioner is urged to contact their own professional advisors before implementing any tax or investment strategy.

hrblockerrolquinn · Answer

Dear J:  I think you have it correct. The first buy/sell is a normal sch D transaction but the 2nd buy/sell is a wash(can not declare the loss). See IRS Pub 17 page 103 and do not forget to add the loss (wash sale) to the price of the stock to figure your basis in that stock.

This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided. Click on my profile to read more.  Errol Quinn Enrolled Agent  Master Tax Advisor

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Is this considered a wash sale/disallowed loss for schedule D?

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