Wash Sales and Tax Time

[michaelstuarts 10]

I wasn't sure where to post this....................

How do day traders handle their wash sales and accounting issues ?

I am aware of the 30 day rule before and after the sale of the security. If one purchases a security and is sold at a loss and another is purchased within the 30 days of the purchase of the first security a wash

sale is triggered, the loss is disallowed and the disallowed loss is added to the cost basis of the new security just purchased. If one keeps buying and selling

within 30 day window wash sales are generated and added to the cost basis

of the subsequent security purchases

 

. Now what happens, you realize finally your on the wrong side of the market and go short and buy to cover. and continue taking short positions on the same security.

 

After a series of long positions,

assume that the first short position is a loss, Is it the buy to cover that triggers the wash sale ? because it is considered a purchase of the security

within the 30 day window ?

 

When going from a series of long positions to a series of short positions on the same security,

When do wash sales start triggering on series of the short side trades:confused:

 

Thanks,

 

//Michael

[MrPaul 10]

this my help...

 

http://www.fairmark.com/capgain/wash/index.htm

 

http://www.sec.gov/answers/wash.htm

 

http://www.smartmoney.com/tax/capital/index.cfm?story=washrules

 

https://www.wellsfargo.com/tax_center/taking_control/investments/wash_sale

[torero 10]

Might want to check out this site as well; wealth of info about trading and taxes.

 

http://www.tradersaccounting.com

[angelaktariel 10]

Oh, this is great info, have to check out those sites MrPaul and Torero are talking about....

 

Thank you both!

 

Eva

[michaelstuarts 10]

Thanks for your reply

 

//Michael

[JLJ 10]

Newbie question re: Wash sales for day traders. I've just read and re-read the linked articles cited above, and I still don't get it. I keep hearing about how taxes triggered by wash sales can wipe out a day trader's gains. But if it's added to the basis when you re-purchase the same equity, say, tomorrow or next week, what's the problem? Just so you close all those positions before the end of the year (which as a day trader you obviously would), can't you then deduct those losses?

If to avoid wash sale tax losses, you cannot trade in the same stocks or ETFs without waiting for 30 (or is it 60?) days to pass, I don't see how you can day trade. There are thousands of potential buys, yes, but there's no time to get to know more than a handful of them really well. So doesn't that mean you'll need to buy and sell some of the same things in a 60 day period?. Doing it in an IRA would sidestep that problem, but everybody says "Don't day trade in your IRA.":confused:

Thanks for any advice, and please forgive this newbie if this is a dumb question.

[Frank 10]

so long as you don't hold anything on the last day of the year overnight, there is absolutely no issue. if you do hold a position on 12/31, then you have to be in accordance with this rule.

[JLJ 10]

Frank,

Thanks so much for your answer. It's so simple. Now I wonder, why the warnings about day traders getting killed on taxes for wash sales?