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If I buy 100 shares of a capital asset, and 3 days later sell 50 shares for a loss, is the loss disallowed because of the wash sale rule?

Forum|Forum|6 years ago
June 1, 2019
3 replies
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I'm thinking it might, because if you imagine taking the 100 shares and splitting it into two lots of 50, Lot A, and Lot B, when you sell Lot A three days later, then Lot B would be 50 shares bought within the +/- 30 day time frame.

Best answer by Celery63

Yes, it is a wash sale and you can not claim the loss on the shares sold three days after the original purchase. The amount of the loss is added to the cost basis of the remaining shares. For details on how the wash sale rules work, see chapter 4 of IRS Publication 550, at this link
https://www.irs.gov/pub/irs-pdf/p550.pdf

Critter

Misunderstood the question.

C

Celery63Answer

Yes, it is a wash sale and you can not claim the loss on the shares sold three days after the original purchase. The amount of the loss is added to the cost basis of the remaining shares. For details on how the wash sale rules work, see chapter 4 of IRS Publication 550, at this link
https://www.irs.gov/pub/irs-pdf/p550.pdf

W

w-burnham

If the amount of the loss is added to the cost basis of the remaining shares, then what if you sell all 100 shares at a loss and there are no remaining shares with a cost basis to add the amount of the loss to? Where does it go?

D

dmertz

It's not clear what you are referring to as a capital asset. If you are talking about shares of a stock or security, yes, this is a wash sale. A wash sale occurs if you sell the shares at a loss within 30 days (before or after) of purchasing substantially identical shares. In this case, shares identical to those sold were purchased less than 30 days earlier.

If you actually buy some quantity of a physical asset and sell half of them at a loss, I don't think that that would be a stock or security subject to the wash-sale rule.

Section 1091, Loss from wash sales of stock or securities: https://www.law.cornell.edu/uscode/text/26/1091