Considerations
GainsKeeper has implemented short-to-short wash sale functionality including an approximation methodology related to the Code §1091(e). This regulation defers losses and affects basis and holding period of newly opened short sales if short sales are closed at a loss and within the 61 day period (beginning 30 days before the date of the close and 30 days after):
the taxpayer opens short sales (or securities futures contracts) for identical or substantially identical securities or
the taxpayer sells identical or substantially identical securities.
GainsKeeper performs the wash sale analysis at the time of the sell-to-open under its approximation methodology. GainsKeeper’s method does NOT go back in time and recalculate and match lots already sold as of the short sale open date. Instead, the system references the open date of the short sale and determines, based upon the close date, if there are any open lots of the same security. If lots exist as of such date and they are not already matched in another wash sale they will be considered available to be matched as of the close date to the closed short sale. Otherwise, the short sale loss will not be deferred under this method.
Limitations in the functionality and this approximation methodology could potentially result in certain timing or other differences and adverse tax consequences and may adversely affect cost basis tracking and the application of the appropriate tax treatment. Neither GainsKeeper nor Wolters Kluwer Financial Services provides tax advice. You should contact your own tax or legal advisor in order to assess the appropriateness and potential risks and tax consequences relating to this methodology as it applies to your specific circumstances. GainsKeeper assumes no responsibility or liabilities, including for any tax, tax penalties or related interest charge resulting directly or indirectly from the consequence of utilizing this method.
Example
Click here to view an example of a Short-to-Short Wash Sale.
|
Date |
Transaction |
Cost/Proceeds |
|
12/1/2007 |
Sell-to-Open 100 shares @$35.00 |
$3,500.00 |
|
2/1/2008 |
Buy-to-Close 100 shares @$40.00 |
$4,000.00 |
|
|
Wash sale Defers loss |
-$500.00 |
|
| ||
|
3/1/2008 |
Sell-to-Open 100 shares @$45.00 |
$4,500.00 |
|
|
W/S to 2/1/2008 |
$500.00 |
|
New Basis |
$5,000.00 | |