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Wash Sale Calculation

ptax255
Level 5

Hi, in which order should the adjusted basis be applied to the new shares? The-30 days or +30 days? Does it matter?

For example, client sold 10 shares. He/she had acquired 100 shares before 30 days and 150 after 30 days. The whole loss is wash obviously, but which of the acquired shares should get a basis adjustment?

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rbynaker
Level 13

I've always done it FIFO.  I think that's required somewhere but can't put my finger on a cite right now.  So start at T-30 days and apply per-share adjustments forward until you either run out of sold shares, run out of acquired shares, or pass T+30.  With my Googlers this often leads to a chain of adjustments that may or may not clear out by year-end.  Also remember the holding period gets adjusted for washed shares which could turn something that looks like short-term into long-term because of the basis adjustment.

The key to surviving this mess is focus on everything per share.

Rick

Edit: Edited to add T+30 expiration.

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6 Comments 6
IRonMaN
Level 15

Doesn't the broker normally do that leg work for you?


Slava Ukraini!
ptax255
Level 5

Not in this case. The acquiring was due to RSU vesting. After researching, this also seems to qualify as wash sale. But let me know if you think otherwise 

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rbynaker
Level 13

I've always done it FIFO.  I think that's required somewhere but can't put my finger on a cite right now.  So start at T-30 days and apply per-share adjustments forward until you either run out of sold shares, run out of acquired shares, or pass T+30.  With my Googlers this often leads to a chain of adjustments that may or may not clear out by year-end.  Also remember the holding period gets adjusted for washed shares which could turn something that looks like short-term into long-term because of the basis adjustment.

The key to surviving this mess is focus on everything per share.

Rick

Edit: Edited to add T+30 expiration.

ptax255
Level 5

Thanks!

ptax255
Level 5

Hi, one more question here. Googler client as well. Do you adjust the basis of the gross shares vested or net (after-tax withheld). I'm thinking net, but just to confirm since this exercise was not fun to begin with.

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rbynaker
Level 13

@ptax255 wrote:

Hi, one more question here. Googler client as well. Do you adjust the basis of the gross shares vested or net (after-tax withheld). I'm thinking net, but just to confirm since this exercise was not fun to begin with.


Net.  My understanding is that Google only issues the net shares and delivers them to the broker.  So the withheld shares are not "acquired".  Other employer plans may be structured differently.  It probably doesn't matter much, if you try to wash to the withheld shares it will just cycle another wash adjustment that will eventually end up in "delivered" shares.

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