I'm unclear how averaging down affects wash sales.
For example, (numbers hypothetical, but situation is not):
Let's say I have a stock that I bought in 2006 that I'm down $500.00. Now it seems to have hit bottom and the price is so low that I buy more at the bottom on 3/6/2007 and sell it the next day (3/7/2007) for a profit of $300.00. I still have a net loss of $200.00.
I understand that because I bought the 3/6/2007 shares w/in 30 days of selling them, that I would not be able to claim a loss on the 2006 shares when I sell on 3/7/2007. (using the First in/first out method)
BUT, Can I just specify which shares I sold (IE. sell the 3/5/2007 shares and claim it as a GAIN), and then months down the road sell the 2006 shares for a loss?
jo
-------------------- "Great Day for Up!"....Dr. Seuss Posts: 3387 | Registered: Mar 2006
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-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
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posted
From what I see you bought twice, once in '06 and then again to average down in '07. Then sold a bunch. I don't see this as a wash sale at all.
BUT - you can specify which shares you sold by getting a letter from your broker - e-mail -
"I would like to specify symbol xxx qty ???? shares sold on 3/7/07 for price ??? were from shares purchased from in '06 date qty ??? price ???." Your broker should write back with concurrence.
This will be your proof come tax season - and you should be able to document your loss.
Please verify this with the big guys - and your broker.
edited.
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
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4: Old Shares You have held 100 shares of XYZ for more than 30 days. You buy an additional 100 shares for $5,000. Less than 31 days later, you sell these shares (the new ones) for $4,000 (a $1,000 loss). You continue to hold the old shares.
There are no rulings that mention this situation. But the requirement for replacement stock should prevent the wash sale rule from applying here. The older shares shouldn't be considered replacement shares for the newer ones.
Note that you have to use specific identification to sell the newer shares. Unless you follow this procedure, the tax law assumes you sold the older shares. If you have a loss on those shares, the wash sale rule applies.
-------------------- "Great Day for Up!"....Dr. Seuss Posts: 3387 | Registered: Mar 2006
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posted
That's why I asked if you had sold before Jo. Good luck.
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
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posted
I thought I understood it until I read the fairmark explanation. lol.
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
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posted
Well, I held on for today anyhow, but I do have to probably sell tommorrow.
If I sold BOTH the averaged-down shares AND the old shares tommorrow, I would actually have an overall gain, but I think the wash sale would apply then.
So, I will probably just sell the new shares for a gain and continue to hold the old ones.
posted
Where I got stuck was here... yes... your original buy was way back in '06 so we are outside the 30 day mark, stock dropped and you bought more on 3/6/07, then sold (for a gain) on 3/7/07. Now, can you specify your shares sold were the '06 shares and claim a loss (with the FIFO rule) or does the new share purchase lock you from doing that?
-------------------- All post are my opinion. Do your own DD. Who's clicking your buy/sell button!? Posts: 7800 | From: Virginia | Registered: May 2006
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