I’m certainly no tax professional, but here are my opinions.
#1 — Adjust them too.
A “second” transaction relative to the same symbol ocurring up to 30 days before a loosing transaction can trigger the wash on the looser. Then the looser’s wash can be added to that prior “second” transaction’s cost basis. I guess that if you don’t add the wash to the cost basis, you would forfeit it which would seem to go in irs favor.
#3 — It looks like IRA purchase can create a wash.
According to Pub 550:
You cannot deduct losses from sales or trades of stock or securities in a wash sale unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities.
A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you:
Buy substantially identical stock or securities,
Acquire substantially identical stock or securities in a fully taxable trade,
Acquire a contract or option to buy substantially identical stock or securities, or
Acquire substantially identical stock for your individual retirement arrangement (IRA) or Roth IRA.
If you sell stock and your spouse or a corporation you control buys substantially identical stock, you also have a wash sale.
The Fairmark article, under Taxation of Investments, Capital Gains, Wash Sales and IRAs, agrees.
Pub 550 also says
More or less stock bought than sold.
If the number of shares of substantially identical stock or securities you buy within 30 days before or after the sale is either more or less than the number of shares you sold, you must determine the particular shares to which the wash sale rules apply. You do this by matching the shares bought with an equal number of the shares sold. Match the shares bought in the same order that you bought them, beginning with the first shares bought. The shares or securities so matched are subject to the wash sale rules.
So according to that, it seems that not all of the shares of a loss become wash shares but only some of them that match with another purchase. I’m going to stop and think about that for a long time. Could that mean that a lot of transactions do not have to become washes because there are no remaining shares that have not already been paired with a buy?
When the number of shares is different between transactions it becomes very complex. I might try to keep track of everything that takes place. You might think that to add to cost basis, you would do the addition, and then put the result in place of the original cost basis.
But that makes it easy to get lost and the confusion gets multiplied as it moves forward with cost basis getting continually modified again and again. It’s also not how irs wants adjustments to cost basis to be reported.
In the 8949 instructions, near the end, there is a table of the codes under “Adjustments to Gain or (Loss)”, code B:
If this transaction is reported on a Part I with box B checked at the top or if this transaction is reported on a Part II with box E checked at the top, enter the correct basis in column (e), and enter -0- in column (g).
If this transaction is reported on a Part I with box A checked at the top or if this transaction is reported on a Part II with box D checked at the top, enter the basis shown on Form 1099-B (or substitute statement) in column (e), even though that basis is incorrect. Correct the error by entering an adjustment in column (g). To figure the adjustment needed, see the Worksheet for Basis Adjustments in Column (g), later. Also, see Example 4—Adjustment for incorrect basis in the instructions for column (h), later.
The basis adjustment from a wash would be the negative of the wash, or proportion thereof, and a “B” goes in column (f). Then if that too becomes a wash, codes “BW” would go in column (f) and the net of the adjustments in column (g). On a spreadsheed, I would like to add columns to keep track of both the B and the W amounts as well as how many shares and dollars left in the wash, etc.