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I'm sitting on a stock position (let's say 100 shares) that's got a nice-sized paper loss that I would like to realize, but I don't want to sit out a month for wash sale rules. Would it be legal to just buy another 100 shares, and as soon as that settles, sell 100 shares, and specify that I sold the first lot? I'd rather swallow the extra risk of a holding a double position for a couple of days than risk missing a big recovery over a month-long period. -- Rob Bernobich
Buying another 100 shares is a great way to protect yourself from any further movement in the stock, but you cannot escape the 30-day
wash sale rule.
Remember, the wash sale rule says that if you sell a security at a loss, you can't deduct the loss on your tax return if you acquired a "substantially identical" security 30 days before or after the sale.
Your strategy, commonly dubbed "doubling up," will work if you wait the requisite 30 days to sell the first lot after you make the second purchase, says Richard Shapiro, an
Ernst & Young
securities tax partner in New York.
We've written about
doubling up before, but here are the basics. If you still believe in your stock position but want to take advantage of the loss on your tax return, go out and buy more shares of your fallen position. Then, wait 31 days from the day you made the second purchase and sell your original position. Now you've generated a loss you can claim on your tax return, but you're still holding the same number of shares.
Revisiting Recaptured Depreciation
Nice piece on the recapture aspect of home office depreciation. I wanted to point out, though, that it could have been mentioned that land cannot be depreciated. Therefore, the land can never be "worthless." Surely you were just referring to the structure on the land being worthless, however, that would not be understood by someone without previous knowledge of this fact. Land is often estimated at about 20% of the cost of real estate, I have heard more than once. -- Richard Lazarow
That's a great point, and one worth repeating. We've
discussed this before and noted in our
recaptured depreciation piece that only the value of the
is part of the calculation.
So, for example, if you paid $150,000 for your home, but the land was worth $50,000, you must use $100,000 as your home's cost basis.
Paperwork Relief for Traders
Since so many readers have been having difficulty keeping track of their trading gains and losses, reader
decided to write in with a suggestion:
"I thought you would be interested in
free service. It does more than
, or any other portfolio tracker for that matter. It generates a Schedule D characterized for long-term and short-term gains and losses. The best part is that GainsKeeper automatically adjusts your cost basis and shares for the most complicated corporate actions like mergers, spin-offs, distributions and splits. It even accounts for wash sales automatically."
I'm passing this information along, but I have not tried the software and can't validate any of Chad's claims. You can check out the site at
www.gainskeeper.com for more information; if you use the software, let me know what you think.
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TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.