Reply To: Dreaded Form 8949 with many trades

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#17059
walter1
Participant

It seems when there is a wash sale, they (TD Ameritrade system) somehow adjusted the cost basis of ANOTHER sale of the same stock

That is how wash sale works. The “wash” adjustment nets the line to zero. Then that “wash” adjustment is added to the cost basis of the shares purchased within 30 days before or after; the irs thereby stipulating that a wash sale has occurred. The broker has added the wash adjustment to the cost basis of that other lot reported on the 1099-B. In this way, you automatically recover the excluded wash loss whenever that other lot is sold.

example:

qt sym acqui dispos procee costbasis Wash gainloss
2 DOWN 2/27 03/17 $0.67 $241.22 $240.66W $0.00
2 DOWN 03/09 03/20 $0.00 $31.33+$240.66 $0.00 -$271.99

The second purchase of 2 DOWN really cost $31.33 as seen on the trade confirmation but, by the wash sale rule, the broker reported the cost as $271.99 (31.33+240.66). And that is why the cost doesn’t match the trade confirmation or spreadsheet. Now since all lots have been sold, the actual loss has been realized, so it was, as you say, transient.

The 1099-B bottom line total cost basis is inflated by the sum of the washes so that bottom line proceeds – cost + wash = gain/loss.

If the second purchase is a smaller quantity than the wash, the confusion could get multiplied, potentally affecting a 3rd lot within 30 days, and so on.

Every time I go through these irs instructions I seem to learn something.

Exception 2 in the 8949 instructions does say that you can attach a statement containing all the same information and in a similar format instead of form 8949.

But pay attention to the bottom of form 8949 where it also says:

Note: If you checked Box A above but the basis reported to the IRS was incorrect, enter in column (e) the basis as reported to the IRS, and enter an adjustment in column (g) to correct the basis. See Column (g) in the separate instructions for how to figure the amount of the adjustment.

There is a similar note for long-term transactions.
Page 8 of the 8949 instructions also adds:

enter the basis shown on Form 1099-B (or substitute statement) in column (e), even though that basis is incorrect.

Also pay attention to page 9 of the 8949 instructions:

If you received a Form 1099-B (or substitute statement) and the amount of nondeductible wash sale loss shown in box 1g is incorrect, enter the correct amount of the nondeductible loss as a positive number in column (g). If the amount of the nondeductible loss is less than the amount shown on Form 1099-B (or substitute statement), attach a statement explaining the difference. If no part of the loss is a nondeductible loss from a wash sale transaction, enter -0- in column (g).

This seems to be a lot of work if you want to comply with the instructions and also report a basis that is different from what is on the 1099 and a wash that is different than what is reported on 1099.

On form 8949 it indicates an easier way:

Note: You may aggregate all short-term transactions reported on Form(s) 1099-B showing basis was reported to the IRS and for which no adjustments or codes are required. Enter the totals directly on Schedule D, line 1a; you aren’t required to report these transactions on Form 8949 (see instructions).

There is a similar note for long-term transactions.
In other words only need to report the lines with a code like W and unreported lines on 8949, especially if it will save you money. The rest of the short-term reported ones can be totalled on Schedule D line 1a. And likewise the long-term reported ones totalled on Sdhedule D line 8a. You should wind up with Schedule D line 7 matching the short-term gain/loss on the 1099, and likewise line 15 matching the long-term gain/loss on 1099.

Re: “that certain ETF”
If it is a grantor trust like GLD, SLV, GBTC, the odd transactions and the discrepancy might be due to them selling gold, silver, or bitcoin monthly to get dollars to pay expenses. It would also reduce the cost below the trade confirmation cost each time they do that for each lot for as long as you hold the lot. If it’s something like that, I could say more.

Re: Not like efile
I didn’t want to efile either.
But with covid, irs is backlogged with paper returns and so I may never see my 2019 refund. And I want my 2020 refund. And I want my EIP’s.
So I used irs “Free Fillable Forms”.
You can check to see if it supports any obscure forms you need. There is no 1040-SR, but 1040 is the same thing with smaller print.
It says above $72,000 can use it, but also less than $72,000, and everybody can use it too. The thing about “Free Fillable Forms” is, it’s like manual forms. There is no software learning curve or frustration. You have to press “Do The Math” button before it computes total fields. You pick, or forget which forms to use and you make your own mistakes. Print the return and check it because it’s up to you to make sure that every line is what you want it to be. Don’t efile it until you verify everything. I preferred to sleep, then check again the next day. I went back and made changes several times.
It does require risking personal information, so ahead of time, make up a password that can’t be guessed and make a username that is hard to guess too; write them down and never use them anyplace else, ever!
I found some password what not to do ideas online.