Hmmm... Are you not the slightest bit curious, then, as to why Fairmark.com keeps bringing up irrelevant references to the whole point? Why would Kaye Thomas keep cluttering up his crisp, concise explanations with irrelevant details, like why the wash sale rule exists? And whether a given strategy could be interpreted as trying to circumvent it?FactualFran wrote: ↑Mon Jan 10, 2022 9:02 pmWhat matters is the text of the law and regulations, whatever the "whole point" is taken to be.iceport wrote: ↑Mon Jan 10, 2022 2:36 pm It does not matter? The whole point of the wash sale rule doesn't matter when interpreting how the rule works?
That doesn't make sense. Then why are the Fairmark.com articles on wash sales littered with references to the whole point: to prevent investors from claiming a loss for selling while staying invested in the same security?
Under your interpretation, what would stop someone from doing exactly that?
Step 1: Sell 100 shares at a loss.
Step 2: Buy 200 shares back again. All Step 1 losses are disallowed, but the losses are added to the cost bases of 100 of the 200 new shares.
Step 3: Sell the 100 shares that were matched with wash shares. Treat those shares as half of the very same lot that you just bought — so there are no replacement shares and there is no wash sale. And so book the full loss from the first sale!!! Retain 100 new shares at the new low share price.
Step 4: Marvel at just how easy it is to render the wash sale rule completely ineffective.
Does it make sense to you that that would be allowed?
It makes sense to me based on the text of the law, regulations, and what is at Fairmark.com about IRS rulings. Similarly, a backdoor Roth contribution makes sense.
From the very Fairmark.com example you cited, the Selling Half section of the Wash Sales and Replacement Stock web page at Fairmark.com:
Huh. It seems to matter what the intentions are, according to the text of that example.Furthermore, although the IRS doesn’t say this, the result shouldn’t change if you gave a single buy order for 200 and your broker happened to execute it by buying two lots of 100 shares each. It’s clear the shares you have left after the sale weren’t bought to replace the shares you sold.
Then in the next example, intent — of the wash sale rule and of the investor — is given an even more prominent role in the explanations:
The "whole point" is pretty much the "whole explanation," no?3: Separate Purchases
You buy 100 shares of XYZ in the morning, and decide to buy another 100 shares in the afternoon of the same day. Within 30 days, you sell the morning shares at a loss.
For all we know, the price of this stock dropped between morning and afternoon, and your afternoon purchase is for the purpose of claiming a loss while maintaining your investment. In other words, you may have been trying to get the result the wash sale rule is designed to prevent. So the IRS will probably contend that the wash sale rule applies in this situation.
The result should be different, though, if you gave a single buy order for 200 and your broker happened to execute it by buying two lots of 100 shares each. In this case it’s clear the shares you have left after the sale weren’t bought to replace the shares you sold.
You are free to keep ignoring the purpose of the wash sale rule, but I honestly think that is misguided and leads to some nonsensical conclusions (like the one above, that would allow one to effectively "launder" a wash sale by simply buying twice as much of the asset as a replacement for what you want to sell at a loss).
Without a better rationale for doing anything else, I'm still standing by my accounting method. That treats the last remaining shares in the OP's example as replacement shares with adjusted cost bases.