If long term gain is more than short term loss

Home Fairmark Forum Taxation of Investments If long term gain is more than short term loss

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  • #1395
    thales
    Participant

    If the investment that’s sold had, say, $3000 long term capital Gains, and $2000 short term Loss. It’s considered a gain, right? So that I don’t need to worry about wash sales if I buy it back within 30 days of sale? (in other words, if I buy it back within 30 days, those $2000 short term loss can still be declared as such, and is not being washed, correct?) Thanks.

    (And thanks for taking your time and effort to upgrade the forum software. I know how much work it must have been for you, beside providing us with such free professional service.)

    #1397
    Kaye Thomas
    Moderator

    Thanks for the message. I think we need to understand what you mean when you say “the investment” had $3,000 long-term capital gains and $2,000 short-term capital loss. What kind of investment are we talking about, that produced both gain and loss?

    #1401
    thales
    Participant

    Hi, thanks.I’m talking about an ETF that had been first bought in 2016, then added through 2016-2018 while the price continued going up. So when I sold it recently, it’s a net gain of (say) $1000, but since the price was lower earlier, when separating the long term and short term in the Form 8949 Box A (short term) and Box D (long term), it’s broken up as a Loss in Box A (say $2000) and a Gain in Box D (say $3000). (Of course it’s not the only fund listed in the Form 8949, the total result is also a net gain, but long term is a collective gain while short term is a collective loss, just like this ETF itself).

    My question is, if I boy this ETF back within 30 days of the sale, will it be subject to the wash sale rule so that that $2000 short term loss can not be claimed? Or is there no possible wash sale because the net was a gain anyway?

    Below is what the transactions are like:

    Date….Price # of Shares $amount
    12/1/16 61.75 40 2477.00
    12/8/16 59.60 40 2391.00
    12/9/16 59.00 15 885.00
    1/25/17 62.40 15 936.00
    3/31/17 69.47 40 2778.80
    2/12/18 88.80 30 2668.95
    2/23/18 91.60 30 2752.95
    4/2/18 83.80 30 2518.95
    4/24/18 86.00 40 3444.95
    9/21/18 96.80 30 2908.95
    10/4/18 91.60 50 4584.95
    10/5/18 90.60 40 3628.95
    10/8/18 88.20 40 3532.95
    10/9/18 85.50 -440 -37614.51

    #1402
    Kaye Thomas
    Moderator

    Gotcha. IRS takes the position that the wash sale rule applies separately to each lot, even when multiple lots of the same security are sold in a single transaction. Therefore, buying this ETF again within 30 days after the sale will cause loss to be disallowed, even though you have an overall gain on your sale transaction.

    #1403
    thales
    Participant

    I see, wow, it never occurred to me so. What that implies seems to be: if a fund/stock that had been purchased at various prices was later sold with huge gains in one transaction, and the sale price is higher than all but one purchase price, then the loss from that one particular purchase can not be claimed if new purchase is made within 30 days of the sale. ?

    If so, it seems it would be prudent to ALWAYS wait for 30 days before buying back, unless it’s clear all the purchase prices were lower than the sale price.

    (In all the years I filed taxes without being aware of this, and it never occurred to me as an issue. But I think I may have never bought back a fund/stock within 30 days of sale anyway.)

    #1404
    Kaye Thomas
    Moderator

    Yes, that’s the way it works. And this is where average basis comes in handy for mutual fund shares, because it eliminates the possibility of having gain on some shares and loss on others in the same sale transaction.

    #1405
    thales
    Participant

    Thank you. I’ve been using your forum for quite a few years now, this is the first time I got replies from you the founder/owner for whom I always hold great respect for the service. I remember earlier when I was unaware you were running the forum all by yourself I once suggested some feature for the forum (like sorting feature), and someone replied that it’s a bit too much for the “programmer” 🙂 .

    It may be more helpful to have an html editor (as opposed to plain text mode) so that bold face would appear as bold face while editing, otherwise some may be deterred from using the new features. But it’s no big deal as the main thing is people come here to get answers to their questions, and that’s been served superbly to satisfaction.

    Many thanks again and best wishes to you.

    • This reply was modified 2 years, 10 months ago by thales.
    #1409
    Kaye Thomas
    Moderator

    Thanks. We agree the editor built into this version of the message board software is awkward to use, and we’re looking at an enhancement. One advantage of this software is that it is modular, with various plugins available to give it more capabilities. Yet each plugin has pros and cons, so we need to research each one before installing and activating it.

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