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Section 1: Wash Sales Attached to Open Positions

 
Positions listed in this section are currently held open and have wash sale losses attached to them. In other words, when you opened these positions they triggered a wash sale adjustment on a loss that had occured within 30 days. If these positions are held open through the end of the year then the wash sales attached may be disallowed for this tax year and deferred to a future tax year when you close the positions.
 
Example:

Figure 1
 
  • In Figure 1 you will notice the report lists 100 shares of AAPL which were bought on 11/12/2013 in your ETrade account; these shares have a wash sale adjustment for the amount of ($2,240.00) attached to them.
  • As long as these shares are held open, you may not be able to take the ($2,240.00) loss attached to them.
  • If you do not sell these shares of stock in the current tax year, then that loss may be disallowed until the tax year in which you sell the shares.
 
This information now allows you to make decisions about your trading. Some possible options:
 
  • You may choose to sell those 100 shares of AAPL which were purchased on 11/12/2013 in order to keep that loss within the current tax year. (Note: If the sale of those shares results in a loss then you may need to avoid opening another position on AAPL within 30 days before or after the loss or else you may create another wash sale.)
     
  • You may choose to keep those shares open until a future point in time, but be aware that there will be a loss attached to them. If you keep these positions open until a future tax year then your loss may be disallowed for the current year.
 
Which shares to close: In the Figure 1 example, you may think that selling 100 shares of AAPL would simply capture the wash sale. However, it is possible that you have more than 100 shares of AAPL currently open, and possibly in more than one account – only the 100 bought on 11/12/2013 have wash sales attached. If you simply sell 100 shares, TradeLog will sell the oldest 100 shares (because of FIFO). So you may want to double check which shares to sell by viewing all open positions, before you execute a trade.
 
How to use this report:
 
While you can examine wash sales attached to open positions throughout the year, it is at the end of the tax year when these wash sales may have a negative effect. Therefore we recommend monitoring your wash sales attached to open positions in December.
 
Consider two scenarios and how this information may guide you:
 
Scenario 1: Let's say that for this tax year you have a net realized loss of ($350.00) as of December 20th. However, with the wash sale attached to open shares of AAPL (as seen in Figure 1 above), you would now report a taxable gain of $1,890.00 – this is because $2,240.00 in losses are currently disallowed. Therefore you may have to pay taxes on a gain when you actually had a net loss!
 
In a scenario like this, you may consider closing the position with the attached wash sale before December 31st. This way the loss is captured in the current tax year. Keep in mind, you would then need to prevent additional wash sales by not opening any other positions on the same security within 30 days before or after the loss.
 
Scenario 2: Let's say that for this tax year you have a net realized loss of ($5,500.00) as of December 20th. Because your losses total more than the $3,000 IRS yearly limit on capital loss deductions, disallowing the ($2,240.00) loss to the next year may not have any substantial difference. Therefore you may choose to do nothing about the open position and focus on making profitable trades.
 
In all situations, keep in mind that the information presented on this report should not be construed as tax, investment, or legal advice; you are responsible for your trading decisions and any results thereof. TradeLog software is only able to report based on the information that has been imported into it. Factors such as user error or inaccurate trade information could alter the accuracy of this report.