How to handle Wash Sale?

john.prewitt's Avatar


17 Jul, 2015 08:05 PM

I have open this discussion so IK can get feedback from users about how MD should provide a feature to handle a Wash Sale.

For the pass several years the IRS has begun to enforce Wash Sale thru the brokerage houses. That is, the Wash Sale have been happening for years but now it has to be reported to the IRS via the 1099-B. Now that the brokerage houses have to report them to the IRS and in doing so they have implemented various schemes to effect Wash Sale.

If you don't know what a Wash Sale use the following link to learn what it is.

This discussion addresses the Sell and Buy of a security where the days between the two transactions are within 30 days and the sale has a loss.

Currently there are no guidelines for how brokerage houses handle Wash Sales other than to ensure the Sale does not have a loss therefore the Wash Sale feature needs to be flexible.

The following are the various items that needs to be considered.

1) The number of shares affected is the less of the number of shares sold or the number of shares brought. That is, the number of shares sold is the maximum. If the number of shares brought is less than the number of shares sold then the number shares affected is the number of shares brought.
2) All lots before the last buy/sell transactions could be affected. That is, if a buy is the last transaction then the number of share brought could be reduced.
3) Additional lot(s) may be added by the brokerage house.
4) There are no limits as to how many Wash Sales can occur.

When a Wash Sale is detected by the brokerage house they will make the necessary changes to the various lots number of shares and cost basis in order to effect a Wash Sale. They will not tell you which ones they changed so you will have to determine which ones changed and if another lot was added. What you are trying to accomplish is to ensure the lots in MD matches the lots from the brokerage house.

Currently the only tools available in MD is the use of BuyXfr and SellXfr transactions.

Since the number of Wash Sale is unlimited then it is suggested that the feature be added to security's Currency/Security History window.

When the user clicks on the New button for the Wash Sale a new window will be created containing the necessary information to effect a Wash Sale. At the top of the window is the date of the Wash Sale and Price of the Sell (entered by user). The date is the date of the Sell if it occurs after the Buy or the date is the date of the Buy if it occurs after the Sell. After the date is entered and the user clicks on a Refresh button, the window is refreshed with two lines for each active lot from the date of the Wash Sale and preceding lots. The second line entry is for those extra lots added by the brokerage house. The date for the second line is the same as the preceding line.

Each line contains the acquired date, # shares, cost basis, unit cost basis (computed by MD), Price of Sell, Lot Value (computed by MD), and Gain/(Loss) (computed by MD).

At the bottom of the window is the sum of # shares, total cost basis and total lots value.

The user is allowed to change the # shares and cost basis for each lot to match the brokerage house values. MD will re-compute the unit cost basis, lot value and gain/loss, as well re-compute the sums at the bottom of the window.

Please review this initial discussion and commit. Some time in the future IK may implement a Wash Sale feature and user input is necessary in order to obtain a useful feature.

John Prewitt

  1. 1 Posted by Ian L on 27 Jul, 2015 05:58 PM

    Ian L's Avatar

    Hi John,

    Thanks for the feature suggestion. Implementing this properly seems like it'll take some careful planning and flexibility, since there isn't a standard way to handle them. I've filed a bug ticket for this. I can't say when we'll get to it, as there are a number of higher priority investment bugs/suggestions I'd like to wrangle first. But, I certainly love to hear everyone's thoughts on how this feature could work for them.

    Infinite Kind Support

  2. System closed this discussion on 19 Mar, 2016 04:58 AM.

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