Another wash sale question!

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  • #7332
    malia8
    Participant

    Hi all, I was hoping to get some insight on more complex issues with the wash sale rule. I will put all my questions here, and look forward to any guidance.

    I purchased 50 shares of an ETF at $100 per share, and sold them for a loss at $80 per share (loss of $1000). That same day, I repurchased 100 shares of the same ETF at $85 per share, and since the market wasn’t doing so well, I sold them at a loss for $75 per share (another loss of $1000).

    How does the wash sale adjustment apply here given that I have closed my second sale/position for a loss? Would I apply the wash sale adjustment of $1000 (or $20 per share) for the first half of the 100 shares? It seems that I would be a net loss of $2000 since I lost $2000 all together ($1000 from the wash sale adjustment and $1000 from the second loss). Is this correct? I would be able to claim a total of $2000 as a capital loss?

    Another question I had was about “substantially identical” – if I purchase shares of the inverse ETF (to above), does this still count as substantially identical? (For example GUSH vs DRIP) They have different CUSIP numbers.

    Any insight would be helpful. Thank you so much!
    Malia

    • This topic was modified 1 year, 2 months ago by malia8.
    #7338
    kaneohe
    Participant

    sounds correct to me. see a similar example 2 on p.57 here
    https://www.irs.gov/pub/irs-pdf/p550.pdf

    don’t know anything about inverse ETF.

    #7343
    Kaye Thomas
    Moderator

    Assuming no other transactions, you would be able to claim the entire loss on sale of the second lot of shares. The loss from the first lot is disallowed, but the disallowed loss is added to the basis of the second lot, doubling the loss on that sale from $1,000 to $2,000.

    Inverse ETFs would not be considered substantially identical.

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