"There's no risk-free way to get around the wash sale rule." -- Kaye Thomas
There is a school of thought out there, that basically goes like this: Wash sales only have impact on your total tax position if they straddle the 31 day period that includes end of the year. So, if I don't trade the symbols in question from, let's say, mid December to mid January, I don't have to report my wash sales.
What is wrong with this approach? The IRS is clear. Every wash sale that you have created during the whole year is reportable on your Schedule D, regardless of it's effect on your total tax.
But that is just a matter of semantics, isn't it? Why bother calculating something that (probably) will result in no net change in your total taxable gain or loss on Schedule D?
Look at it this way...you are cruising in not very clearly charted waters with your tax return as it is, being a stock trader. You are claiming all kinds of deductions (maybe even on Schedule C) that will set off warning bells at the IRS office, and you are drawing scrutiny to your tax return already.
Filing as a trader, or an investor with ""odd" deductions increases your audit risk.
Do you really want to take the chance and not report your trades in compliance with the tax laws?
Other potential implications of wash sales:
- If you pay quarterly estimated tax payments, wash sales carried between quarters could have an impact and should be calculated properly
- Your holding period for the replacement stock includes the holding period of the stock you sold. This rule has been put into place to prevent you from turning a long term loss into a short term one
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