Tax/Wash Sale Question?

Question

Hello -
I have a question about whether any of this would be considered a "wash sale" ?
Bought 304 sh of X on 10/6/06 Sold 10/18 @ $19 net gain
Bought 94 sh of X on 10/10/06 Sold 10/18$(40) net loss

Bought 325 Sh X on 10/23/06 Sold 325 Sh 10/25/06 Net loss of $1,082.00
Seems to me that the $40 loss a wash but the $1082 is not a wash but maybe that is wish ful thinking?

Thanks in advance for any help!

Answer 1

The $40 loss is a wash and you will add it to the basis of the first 94 of the 325 shares purchased on 10/23. Your holding period for those 94 shares will start on 10/10/06. The remaining 231 shares will have a normal basis and holding period.

From the HRB tax course:
Example: KT purchased 100 shares of XYZ stock on May 9, 2002. On June 7, 2005, she sold the stock at a loss of $500. On June 17, 2005, she purchased 100 shares of XYZ for $4,000. Her $500 loss is not deductible, but is added to the basis of the new shares purchased. The basis of the new shares is $4,500 and their holding period begins May 9, 2002.

From Pub 550 pg 56:
How to report. Report a wash sale or trade on line 1 or line 8 of Schedule D (Form 1040), whichever is appropriate. Show the full amount of the loss in parentheses in column (f). On the next line, enter “Wash Sale” in column (a) and the amount of the loss not allowed as a positive amount in column (f).

Answer 2

You're right, only the $40 net loss on the 94 shares is a wash sale. Wash sales don't apply to gains so don't apply to the ones bought on 10/6. For the shares bought on 10/12, you have a short term capital loss. Remember that 94 of those shares are the result of a wash sale, so take the basis of the shares you bought on 10/10.