Wash rule help...

[pietistic]

If I buy a stock, sell it for a loss then buy it back within 30 days and sell that buy for a loss - the wash rule doesn't apply correct? I can claim both losses?

[Damon]

Not sure. I know you have to adjust your cost basis of the 2nd purchase to reflect the disallowed loss, but if you sell the 2nd lot at a loss as well, you may be able to write off the entire loss as long as you don't purchase it again within 30 days.

More on the wash sale rule:

http://www.fool.com/taxes/2000/taxes001006.htm
http://invest-faq.com/articles/tax-wash-sale.html

http://www.investopedia.com/articles/04/122704.asp

[dmonkey]

I think the first sale is a wash, however you can adjust your cost basis on the new purchase and use that to calculate the losses you claim. For example, you buy 100 shares of XYZ for $1000 and sell it for $500, thus incurring a $500 loss. You then repurchase your 100 shares of XYZ for $600 within 30 days. Your $500 loss is disallowed, but gets added to the basis of your new shares. The basis is $1100 ($600 + $500). You then use this basis to calculate your loss/gain on the replacement shares.

For the record, IANAL (or an accountant). There are some specifics you should check out on what qualifies as "replacement shares" and how to handle shares that were accumulated in seperate buys but sold together (I'm not sure of the specifics of you situation). Lastly, I should point out that that when you do this the holding period for the new shares is extended to include the time you held the previous shares (This can be beneficial since it gives a better chance of applying the favorable 15% rate on long-term capital gains).

[pietistic]

They are actually option calls, and it was the same CALL so I'm sure they are considered replacement shares.