My First Inadvertent Wash Sale - Please Help Me Fix!

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Arena08
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My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

All right Bogleheads!  Your collective knowledge and experience are again being called upon.  Feel free to break it down Barney style in any advice you may have to share.  I seem to have inadvertently put myself in a wash sale situation.  I have two taxable brokerage accounts, one with Fidelity, and one with Vanguard.  These are in addition to various other retirement accounts in the form of IRA's and 401K's, but the additional retirement accounts aren't a factor in the problem I currently face.  I have turned off all automatic reinvesting of dividends, and realize I could have avoided the issue holding different indexes in each taxable brokerage, but that's water under the bridge at this juncture.  Typically with my taxable brokerages, I'm a buy and hold forever guy.  However, last week I thought I was going to make a large purchase not related to investing with funds from the Fidelity Brokerage, so I sold just a little over $30,000 of VTI from the account (made up of 12 separate lots of shares where six of the lots had capital gains totaling $1,202.41, and six had capital losses totaling $1,943.35).  Both the gains and losses have short and long term components to them.

I've also been buying around $1,000 per month of VTSAX in my Vanguard taxable brokerage as part of my regular monthly investments.  So about a week before I sold $30,000 of VTI in my Fido brokerage, I had purchased $1,000 of VTSAX at Vanguard.  As you all are aware, VTI and VTSAX aren't substantially different funds in the eyes of the IRS, so I believe I've created my first ever wash sale (can't have made a purchase +/- 30 days of a sale unless substantially different fund).

I would like to solve this issue with as little paperwork and record keeping as possible, and I'm not even terribly concerned if I were to not claim the loss portion as this was not the reason I made these transactions to start with (I.e., I was not attempting tax loss harvesting).  It's my understanding that after I receive my 1099 from Fido next year it will show the $1202.41 of capital gains on which I will owe taxes at either the short or long term capital gains tax rates; as well as the $1943.35 of capital losses that I will not be able to claim due to the wash sale.  Further, it's my understanding that I can sell that $1,000 of VTSAX at Vanguard and use the $1943.35 of losses to add to the cost basis of the $1,000 of VTSAX that I purchased and subsequently sold at Vanguard to ensure I receive credit for that loss.  Is all this correct?  If I do this, the capital gains and losses and cost basis data on the 1099s from both Vanguard and Fidelity will not reflect the numbers I use on my tax return, but I guess that's what records are for in the case of an audit.  Also, what is the earliest I can sell the $1,000 of VTSAX?  Is it 30 days from original purchase, or 30 days after the sale of VTI at Fido that occurred about a week later?

As an alternative, I suppose I could just pay tax on the gains and never claim the losses using the cost basis reflected at Vanguard.  Is this correct as well?

I'm in a little over my head on dealing with this as cleanly as possible, and would appreciate any insight you may have to share.  Thanks for any and all help!
rkhusky
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by rkhusky »

Start with the number of shares of VTI sold for a loss in date order from oldest to newest.
Compute the VTI-equivalent number of VTSAX shares that were purchased = (share price of VTSAX/share price of VTI)*number of shares of VTSAX, where the share prices are for the date of the purchase.
Starting with the oldest VTI shares, count off shares until you reach the number of VTI-equivalent shares. These are the shares for which you cannot claim a loss. You can claim the loss on the remaining shares.
*Take the total loss for which you cannot take the loss and divide by the number of shares of VTSAX. Increase the basis (cost or price) of the VTSAX shares by this amount. The is the number that you will use when you sell the VTSAX shares to compute the gain/loss.
You can sell these VTSAX shares at any time.

*This isn't quite right, but it is fine if you only have one lot of VTI that is washed or if you sell all these shares of VTSAX at one time. Otherwise, one should match up each lot of washed VTI shares with the VTI-equivalent shares of VTSAX and adjust each lot separately. You might then end up with multiple lots of VTSAX with different prices.
Last edited by rkhusky on Sun Aug 07, 2022 6:28 pm, edited 1 time in total.
lazynovice
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by lazynovice »

The absolute cleanest way to deal with it is to sell the lot you purchased in the wash sale period and don’t buy VTI/VTSAX again in the wash sale period.

If you don’t do that, then remember that the wash sale is done on a share by share basis. You bought 10 or so shares of VTSAX so roughly 10 shares of the loss on VTI is washed. I don’t think I’ve ever seen anyone address the price difference between VTI (200) and VTSAX (100). You’d apply to loss that you need to defer to the cost basis of the new VTSAX shares. When you file your taxes you’d file a form that corrects the 1099 you’ll get from Fidelity. Then when you sell the shares of VTSAX someday, you’ll file that form again correcting the gain Vanguard reports.

If it were me, I’d sell the lot and buy something else for the 20 something days you have remaining. Of course if you sell those at a loss, the clock starts over.
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squirrel1963
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by squirrel1963 »

lazynovice wrote: Sun Aug 07, 2022 6:16 pm The absolute cleanest way to deal with it is to sell the lot you purchased in the wash sale period and don’t buy VTI/VTSAX again in the wash sale period.

If you don’t do that, then remember that the wash sale is done on a share by share basis. You bought 10 or so shares of VTSAX so roughly 10 shares of the loss on VTI is washed. I don’t think I’ve ever seen anyone address the price difference between VTI (200) and VTSAX (100). You’d apply to loss that you need to defer to the cost basis of the new VTSAX shares. When you file your taxes you’d file a form that corrects the 1099 you’ll get from Fidelity. Then when you sell the shares of VTSAX someday, you’ll file that form again correcting the gain Vanguard reports.

If it were me, I’d sell the lot and buy something else for the 20 something days you have remaining. Of course if you sell those at a loss, the clock starts over.
I could be wrong but capital gains(losses) are accounted on the basis of the dollar amount of the transaction, and the number of shares is not relevant.
I don't have the desktop handy here, but as far as remember Fido and Vang show you the dollar amount of disallowed gain(loss) due to wash sales rules.

Edit: in any case I agree on recommendation, sell the lot in question and maybe buy SWTSX only for the next 30 days. Or if you are worried that using different indexes is not enough just get VFINX.
Last edited by squirrel1963 on Sun Aug 07, 2022 6:30 pm, edited 1 time in total.
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rkhusky
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by rkhusky »

squirrel1963 wrote: Sun Aug 07, 2022 6:26 pm I could be wrong but capital gains(losses) are accounted on the basis of the dollar amount of the transaction, and the number of shares is not relevant.
I don't have the desktop handy here, but as far as remember Fido and Vang show you the dollar amount of disallowed gain(loss) due to wash sales rules.
You report the dollar amounts on form 8949, but wash sales are matched up based on the shares, oldest to newest.
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squirrel1963
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by squirrel1963 »

rkhusky wrote: Sun Aug 07, 2022 6:30 pm
squirrel1963 wrote: Sun Aug 07, 2022 6:26 pm I could be wrong but capital gains(losses) are accounted on the basis of the dollar amount of the transaction, and the number of shares is not relevant.
I don't have the desktop handy here, but as far as remember Fido and Vang show you the dollar amount of disallowed gain(loss) due to wash sales rules.
You report the dollar amounts on form 8949, but wash sales are matched up based on the shares, oldest to newest.
Sorry but I am confused, I would appreciate being told like I am 5 :-). My understanding is that your go by lot. Suppose I have these 2 lots:

lot 1: 10 shares FOO.A cost basis $100/share bought 4/1/2022
lot 2: 10 shares FOO.A cost basis $120/share bought 7/1/2022

On 8/1/2022 FOO.A is $110, so I sell lot 2 for $1100, and incur capital loss of $10/share, $100 total
I then buy 5 shares of FOO.B at $220 for a total of $1100, but because FOO.B is a different share class of FOO.A, I have a disallowed loss of $100 so the entirety of the sale I made is a wash sale and cannot be reported.

So basically in my thinking when I sell lot 2 of FOO.A and buy any amount of FOO.B I have a disallowed loss for the whole sale.

But maybe the situation is different if I only buy 1 share of FOO.B, in which case the disallowed loss is .... ?
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lazynovice
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by lazynovice »

squirrel1963 wrote: Sun Aug 07, 2022 6:57 pm
rkhusky wrote: Sun Aug 07, 2022 6:30 pm
squirrel1963 wrote: Sun Aug 07, 2022 6:26 pm I could be wrong but capital gains(losses) are accounted on the basis of the dollar amount of the transaction, and the number of shares is not relevant.
I don't have the desktop handy here, but as far as remember Fido and Vang show you the dollar amount of disallowed gain(loss) due to wash sales rules.
You report the dollar amounts on form 8949, but wash sales are matched up based on the shares, oldest to newest.
Sorry but I am confused, I would appreciate being told like I am 5 :-). My understanding is that your go by lot. Suppose I have these 2 lots:

lot 1: 10 shares FOO.A cost basis $100/share bought 4/1/2022
lot 2: 10 shares FOO.A cost basis $120/share bought 7/1/2022

On 8/1/2022 FOO.A is $110, so I sell lot 2 for $1100, and incur capital loss of $10/share, $100 total
I then buy 5 shares of FOO.B at $220 for a total of $1100, but because FOO.B is a different share class of FOO.A, I have a disallowed loss of $100 so the entirety of the sale I made is a wash sale and cannot be reported.

So basically in my thinking when I sell lot 2 of FOO.A and buy any amount of FOO.B I have a disallowed loss for the whole sale.

But maybe the situation is different if I only buy 1 share of FOO.B, in which case the disallowed loss is .... ?
No, you have a partial wash sale. Think about it this way. If I sell 100,000 shares at a loss and then buy one share within the 30 day window, I would not have my entire loss disallowed. I would have the loss for just one share disallowed. I have changed my economic position for 99,000 shares.
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squirrel1963
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by squirrel1963 »

lazynovice wrote: Sun Aug 07, 2022 8:01 pm
squirrel1963 wrote: Sun Aug 07, 2022 6:57 pm
rkhusky wrote: Sun Aug 07, 2022 6:30 pm
squirrel1963 wrote: Sun Aug 07, 2022 6:26 pm I could be wrong but capital gains(losses) are accounted on the basis of the dollar amount of the transaction, and the number of shares is not relevant.
I don't have the desktop handy here, but as far as remember Fido and Vang show you the dollar amount of disallowed gain(loss) due to wash sales rules.
You report the dollar amounts on form 8949, but wash sales are matched up based on the shares, oldest to newest.
Sorry but I am confused, I would appreciate being told like I am 5 :-). My understanding is that your go by lot. Suppose I have these 2 lots:

lot 1: 10 shares FOO.A cost basis $100/share bought 4/1/2022
lot 2: 10 shares FOO.A cost basis $120/share bought 7/1/2022

On 8/1/2022 FOO.A is $110, so I sell lot 2 for $1100, and incur capital loss of $10/share, $100 total
I then buy 5 shares of FOO.B at $220 for a total of $1100, but because FOO.B is a different share class of FOO.A, I have a disallowed loss of $100 so the entirety of the sale I made is a wash sale and cannot be reported.

So basically in my thinking when I sell lot 2 of FOO.A and buy any amount of FOO.B I have a disallowed loss for the whole sale.

But maybe the situation is different if I only buy 1 share of FOO.B, in which case the disallowed loss is .... ?
No, you have a partial wash sale. Think about it this way. If I sell 100,000 shares at a loss and then buy one share within the 30 day window, I would not have my entire loss disallowed. I would have the loss for just one share disallowed. I have changed my economic position for 99,000 shares.
Ah okay, in retrospect of course what you say is perfectly logical thanks :-)
I think this means in the past tax returns I might have declared some losses and I didn't. Not enough to make a difference anyway because luckily i haven't done enough wash sales, but it's great to know if I mess it up again.
Thanks again :beer
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livesoft
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by livesoft »

lazynovice wrote: Sun Aug 07, 2022 8:01 pmNo, you have a partial wash sale. Think about it this way. If I sell 100,000 shares at a loss and then buy one share within the 30 day window, I would not have my entire loss disallowed. I would have the loss for just one share disallowed. I have changed my economic position for 99,000 shares.
? I might have written "I have NOT changed my economic position for 99,999 shares." But maybe you can clarify, please?
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rkhusky
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by rkhusky »

squirrel1963 wrote: Sun Aug 07, 2022 6:57 pm Sorry but I am confused, I would appreciate being told like I am 5 :-). My understanding is that your go by lot. Suppose I have these 2 lots:

lot 1: 10 shares FOO.A cost basis $100/share bought 4/1/2022
lot 2: 10 shares FOO.A cost basis $120/share bought 7/1/2022

On 8/1/2022 FOO.A is $110, so I sell lot 2 for $1100, and incur capital loss of $10/share, $100 total
I then buy 5 shares of FOO.B at $220 for a total of $1100, but because FOO.B is a different share class of FOO.A, I have a disallowed loss of $100 so the entirety of the sale I made is a wash sale and cannot be reported.
It might be worthwhile to go through the math.

If the share prices of FOO.A and FOO.B, were $110 and $220, respectively, on the same day, then the process would work as follows:

10 shares of A sold at a loss. 10 A-equivalent shares of B purchased (= $220/$110 * 5 shares). So, your full loss of $100 is disallowed.
You add $20 to the share price of B ($100/5), making it $240/sh. When you sell FOO.B, you recoup the loss that was disallowed.

On the other hand, if you just bought 1 share of FOO.B, which is 2 A-equivalent shares, you would have a partial wash sale.
You can claim the loss on 8 shares of A (or $80), but the remaining $20 loss is disallowed. The basis of the 1 share of FOO.B is raised to $240/share.
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by lazynovice »

livesoft wrote: Sun Aug 07, 2022 8:23 pm
lazynovice wrote: Sun Aug 07, 2022 8:01 pmNo, you have a partial wash sale. Think about it this way. If I sell 100,000 shares at a loss and then buy one share within the 30 day window, I would not have my entire loss disallowed. I would have the loss for just one share
disallowed. I have changed my economic position for 99,000 shares.
? I might have written "I have NOT changed my economic position for 99,999 shares." But maybe you can clarify, please?
Math is hard, livesoft. :oops: I’m not even drinking. Thanks for the catch.
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squirrel1963
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by squirrel1963 »

rkhusky wrote: Sun Aug 07, 2022 8:35 pm
squirrel1963 wrote: Sun Aug 07, 2022 6:57 pm Sorry but I am confused, I would appreciate being told like I am 5 :-). My understanding is that your go by lot. Suppose I have these 2 lots:

lot 1: 10 shares FOO.A cost basis $100/share bought 4/1/2022
lot 2: 10 shares FOO.A cost basis $120/share bought 7/1/2022

On 8/1/2022 FOO.A is $110, so I sell lot 2 for $1100, and incur capital loss of $10/share, $100 total
I then buy 5 shares of FOO.B at $220 for a total of $1100, but because FOO.B is a different share class of FOO.A, I have a disallowed loss of $100 so the entirety of the sale I made is a wash sale and cannot be reported.
It might be worthwhile to go through the math.

If the share prices of FOO.A and FOO.B, were $110 and $220, respectively, on the same day, then the process would work as follows:

10 shares of A sold at a loss. 10 A-equivalent shares of B purchased (= $220/$110 * 5 shares). So, your full loss of $100 is disallowed.
You add $20 to the share price of B ($100/5), making it $240/sh. When you sell FOO.B, you recoup the loss that was disallowed.

On the other hand, if you just bought 1 share of FOO.B, which is 2 A-equivalent shares, you would have a partial wash sale.
You can claim the loss on 8 shares of A (or $80), but the remaining $20 loss is disallowed. The basis of the 1 share of FOO.B is raised to $240/share.
Thanks very much. Your comment and @lazynovice comment is much appreciated.
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Topic Author
Arena08
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

lazynovice wrote: Sun Aug 07, 2022 6:16 pm The absolute cleanest way to deal with it is to sell the lot you purchased in the wash sale period and don’t buy VTI/VTSAX again in the wash sale period.

If you don’t do that, then remember that the wash sale is done on a share by share basis. You bought 10 or so shares of VTSAX so roughly 10 shares of the loss on VTI is washed. I don’t think I’ve ever seen anyone address the price difference between VTI (200) and VTSAX (100). You’d apply to loss that you need to defer to the cost basis of the new VTSAX shares. When you file your taxes you’d file a form that corrects the 1099 you’ll get from Fidelity. Then when you sell the shares of VTSAX someday, you’ll file that form again correcting the gain Vanguard reports.

If it were me, I’d sell the lot and buy something else for the 20 something days you have remaining. Of course if you sell those at a loss, the clock starts over.
How does it work if I were to sell that $1,000 VTSAX purchase? And you are saying it must be done in the wash sale period? If I were to do this to rid myself of these shares, how do I report it correctly when doing my taxes?
rkhusky
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by rkhusky »

Arena08 wrote: Sun Aug 07, 2022 9:46 pm How does it work if I were to sell that $1,000 VTSAX purchase? And you are saying it must be done in the wash sale period? If I were to do this to rid myself of these shares, how do I report it correctly when doing my taxes?
When you sell all those shares, you recover any disallowed loss. You can do that at any point. You will have adjusted the basis of the VTSAX and you would report it like any other sale. You (or your account or tax software) would add a couple entries on form 8949 to note the wash sale on the sale of VTI.
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Arena08
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

rkhusky wrote: Sun Aug 07, 2022 9:58 pm
Arena08 wrote: Sun Aug 07, 2022 9:46 pm How does it work if I were to sell that $1,000 VTSAX purchase? And you are saying it must be done in the wash sale period? If I were to do this to rid myself of these shares, how do I report it correctly when doing my taxes?
When you sell all those shares, you recover any disallowed loss. You can do that at any point. You will have adjusted the basis of the VTSAX and you would report it like any other sale. You (or your account or tax software) would add a couple entries on form 8949 to note the wash sale on the sale of VTI.
I’m sorry RKHusky. I’m such a novice on this that I was wondering if you could explain it a little more clearly for me to understand. I can see how selling the VTSAX would recover any disallowed losses. When you say I “will have adjusted the basis of the VTSAX” are you referring to an actual form I will have to fill out to adjust it, or simply the action of selling the $1,000 position is what adjusts it. Also, can you tell me exactly what would need to be written on the 8949 noting the wash sale? I’ve never encountered this before so I am quite green on this subject. Thanks!
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by ee_guy »

Two ancillary questions. Vanguard is not aware of the wash sales since the TLH was done at Fidelity. Assuming Spec ID is used at Vanguard, is it possible to have the basis for the $1,000 VTSAX at Vanguard corrected?

Fidelity will not record a wash sale on the 1099 at year end since the wash purchase was at Vanguard. When OP files the tax return correctly including the wash sale, the cost bases on the tax return will not match data sent to the IRS by Fidelity. Will that trigger a letter?
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Katietsu »

Arena08 wrote: Sun Aug 07, 2022 10:22 pm
rkhusky wrote: Sun Aug 07, 2022 9:58 pm
Arena08 wrote: Sun Aug 07, 2022 9:46 pm How does it work if I were to sell that $1,000 VTSAX purchase? And you are saying it must be done in the wash sale period? If I were to do this to rid myself of these shares, how do I report it correctly when doing my taxes?
When you sell all those shares, you recover any disallowed loss. You can do that at any point. You will have adjusted the basis of the VTSAX and you would report it like any other sale. You (or your account or tax software) would add a couple entries on form 8949 to note the wash sale on the sale of VTI.
I’m sorry RKHusky. I’m such a novice on this that I was wondering if you could explain it a little more clearly for me to understand. I can see how selling the VTSAX would recover any disallowed losses. When you say I “will have adjusted the basis of the VTSAX” are you referring to an actual form I will have to fill out to adjust it, or simply the action of selling the $1,000 position is what adjusts it. Also, can you tell me exactly what would need to be written on the 8949 noting the wash sale? I’ve never encountered this before so I am quite green on this subject. Thanks!

All this would get done on the Form 8949 when you do your taxes. See instructions for columns f and g. These columns allow you to report the same info in columns a-e as the broker sends to the IRS while reporting the correct gain/loss.

In your situation, the brokers will not report the wash sale or adjust the basis because neither knows about the transaction at the other broker. So you would need to make the adjustments yourself. But then after you file your 2022 taxes, you should not need to worry about it further.

This is not being green. Many people never figure this stuff out. In this situation, with two brokers, two different ticker symbols, and selling the problem VTSAX, not sure how many would actually bother to get the reporting correct. Ignoring it would still end up with the correct amount of taxes and an 8949 that matches the 1099-B.
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by rkhusky »

Arena08 wrote: Sun Aug 07, 2022 10:22 pm
rkhusky wrote: Sun Aug 07, 2022 9:58 pm
Arena08 wrote: Sun Aug 07, 2022 9:46 pm How does it work if I were to sell that $1,000 VTSAX purchase? And you are saying it must be done in the wash sale period? If I were to do this to rid myself of these shares, how do I report it correctly when doing my taxes?
When you sell all those shares, you recover any disallowed loss. You can do that at any point. You will have adjusted the basis of the VTSAX and you would report it like any other sale. You (or your account or tax software) would add a couple entries on form 8949 to note the wash sale on the sale of VTI.
I’m sorry RKHusky. I’m such a novice on this that I was wondering if you could explain it a little more clearly for me to understand. I can see how selling the VTSAX would recover any disallowed losses. When you say I “will have adjusted the basis of the VTSAX” are you referring to an actual form I will have to fill out to adjust it, or simply the action of selling the $1,000 position is what adjusts it. Also, can you tell me exactly what would need to be written on the 8949 noting the wash sale? I’ve never encountered this before so I am quite green on this subject. Thanks!
You adjust the basis of VTSAX in your own records - no form to fill out, other than form 8949 when you fill out your taxes.
As far as form 8949 goes, if I was filling out by hand, I would put a line for the sale of shares of VTI that had a gain, a line for the sale of shares of VTI that had an allowed loss, and a line for the sale of the shares of VTI that had a disallowed loss. In the latter, you would use code W in column (f) and then the amount of the disallowed loss as a positive number in column (g).
The sale of VTSAX would go on another line, with code B in column (f) and the amount of the disallowed loss as a negative number in column (g).
If there is an amount in column (g), column (h) should be (h) = (d) - (e) + (g)
Info from your 1099-B should be used to fill in columns (a) - (e). Above assumes that the shares above are covered (from after 2012 and either boxes A or D checked on 1099, i.e. reported to the IRS).

Katietsu wrote: Sun Aug 07, 2022 11:22 pm Ignoring it would still end up with the correct amount of taxes and an 8949 that matches the 1099-B.
True if OP sells VTSAX this year.
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by rkhusky »

ee_guy wrote: Sun Aug 07, 2022 11:04 pm Two ancillary questions. Vanguard is not aware of the wash sales since the TLH was done at Fidelity. Assuming Spec ID is used at Vanguard, is it possible to have the basis for the $1,000 VTSAX at Vanguard corrected?

Fidelity will not record a wash sale on the 1099 at year end since the wash purchase was at Vanguard. When OP files the tax return correctly including the wash sale, the cost bases on the tax return will not match data sent to the IRS by Fidelity. Will that trigger a letter?
If the VTSAX shares are sold this year, it should be obvious what happened. There will be positive and negative adjustments that cancel out on the 8949.
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Arena08
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

Holy cow is that complicated! All because I was thinking about buying a boat! Haha. Thanks very much for all the responses and information shared! I think I’m armed with enough info to not screw this up too badly when I TurboTax it all next year. Looks like we’re about to have a much larger IRS, so I’m sure they’ll happily help me fix it if I don’t get it quite right. :happy

My plan (since I have specific ID set up at Vanguard) is to liquidate the entire $1,000 position of VTSAX that I purchased before the VTI sale. Then the fun with the 8949 starts!

You folks are great! Thanks for all the help!
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squirrel1963
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by squirrel1963 »

Arena08 wrote: Mon Aug 08, 2022 8:01 am Holy cow is that complicated! All because I was thinking about buying a boat! Haha. Thanks very much for all the responses and information shared! I think I’m armed with enough info to not screw this up too badly when I TurboTax it all next year. Looks like we’re about to have a much larger IRS, so I’m sure they’ll happily help me fix it if I don’t get it quite right. :happy

My plan (since I have specific ID set up at Vanguard) is to liquidate the entire $1,000 position of VTSAX that I purchased before the VTI sale. Then the fun with the 8949 starts!

You folks are great! Thanks for all the help!
Also many thanks to everyone from my part, it was super helpful for me to understand wash rules and tax lots when the disallowed gain is less than the whole lot. Obvious in retrospect but wash sales are not very common for me, and usually when it happens the disallowed gain would be the whole lot. Using TurboTax actually backfires sometimes because it hides a lot of things from you especially now that it handles 1099-B automatically.
LMP | Liability Matching Portfolio | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks
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Arena08
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

Just a quick follow up in case anyone finds themselves reading this in a similar situation in the future. I’ve definitely saved all the information in this thread for future reference, but I was able to undo my wash sale. Although I made the original sale of the $30k on a Friday, Fidelity gave me until the following Tuesday to change which actual specific lots were selected for sale. In order to avoid the paperwork drill of the form 8949 and having 1099’s that didn’t match the cost data I was filing with the IRS, I elected to select lots that only had gains. While I will have to pay 15% capital gains tax on them, I anticipate paying this or higher at any future point. So I’m basically just bringing forward the payment of the taxes today and resetting the cost basis when I elect to reinvest the $30k at today’s prices.

Just wanted to make a note that you could potentially reverse a wash sale situation if you catch it soon enough. Thanks again to all who replied to the thread!
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squirrel1963
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by squirrel1963 »

Arena08 wrote: Mon Aug 08, 2022 8:54 pm Just a quick follow up in case anyone finds themselves reading this in a similar situation in the future. I’ve definitely saved all the information in this thread for future reference, but I was able to undo my wash sale. Although I made the original sale of the $30k on a Friday, Fidelity gave me until the following Tuesday to change which actual specific lots were selected for sale. In order to avoid the paperwork drill of the form 8949 and having 1099’s that didn’t match the cost data I was filing with the IRS, I elected to select lots that only had gains. While I will have to pay 15% capital gains tax on them, I anticipate paying this or higher at any future point. So I’m basically just bringing forward the payment of the taxes today and resetting the cost basis when I elect to reinvest the $30k at today’s prices.

Just wanted to make a note that you could potentially reverse a wash sale situation if you catch it soon enough. Thanks again to all who replied to the thread!
OP, thanks for the update. Needless to say I had no idea you can change the SpecID of the tax lot post-facto. So thanks, this is a great thread for me.
LMP | Liability Matching Portfolio | safe portfolio: TIPS ladder + I-bonds + Treasuries | risky portfolio: US stocks / US REIT / International stocks
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Arena08
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

You bet, Squirrel! I’m glad it’s been helpful for you as well. I know that this has been a real learning experience for me. This forum is an incredible resource of incredible folks, and I count myself lucky to be a member.
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by sycamore »

squirrel1963 wrote: Tue Aug 09, 2022 12:25 am
Arena08 wrote: Mon Aug 08, 2022 8:54 pm Just a quick follow up in case anyone finds themselves reading this in a similar situation in the future. I’ve definitely saved all the information in this thread for future reference, but I was able to undo my wash sale. Although I made the original sale of the $30k on a Friday, Fidelity gave me until the following Tuesday to change which actual specific lots were selected for sale. In order to avoid the paperwork drill of the form 8949 and having 1099’s that didn’t match the cost data I was filing with the IRS, I elected to select lots that only had gains. While I will have to pay 15% capital gains tax on them, I anticipate paying this or higher at any future point. So I’m basically just bringing forward the payment of the taxes today and resetting the cost basis when I elect to reinvest the $30k at today’s prices.

Just wanted to make a note that you could potentially reverse a wash sale situation if you catch it soon enough. Thanks again to all who replied to the thread!
OP, thanks for the update. Needless to say I had no idea you can change the SpecID of the tax lot post-facto. So thanks, this is a great thread for me.
Just FYI, not all brokerages allow this. Like at Vanguard you have to specify the lots as part of the order request.
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by rkhusky »

Arena08 wrote: Mon Aug 08, 2022 8:54 pm Just a quick follow up in case anyone finds themselves reading this in a similar situation in the future. I’ve definitely saved all the information in this thread for future reference, but I was able to undo my wash sale. Although I made the original sale of the $30k on a Friday, Fidelity gave me until the following Tuesday to change which actual specific lots were selected for sale. In order to avoid the paperwork drill of the form 8949 and having 1099’s that didn’t match the cost data I was filing with the IRS, I elected to select lots that only had gains. While I will have to pay 15% capital gains tax on them, I anticipate paying this or higher at any future point. So I’m basically just bringing forward the payment of the taxes today and resetting the cost basis when I elect to reinvest the $30k at today’s prices.

Just wanted to make a note that you could potentially reverse a wash sale situation if you catch it soon enough. Thanks again to all who replied to the thread!
I probably wouldn't have paid so much ($300+) to avoid a couple entries on a tax form, but I expected to be in the 0% LTCG tax bracket in retirement.
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Arena08
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

sycamore wrote: Tue Aug 09, 2022 8:16 am
squirrel1963 wrote: Tue Aug 09, 2022 12:25 am
Arena08 wrote: Mon Aug 08, 2022 8:54 pm Just a quick follow up in case anyone finds themselves reading this in a similar situation in the future. I’ve definitely saved all the information in this thread for future reference, but I was able to undo my wash sale. Although I made the original sale of the $30k on a Friday, Fidelity gave me until the following Tuesday to change which actual specific lots were selected for sale. In order to avoid the paperwork drill of the form 8949 and having 1099’s that didn’t match the cost data I was filing with the IRS, I elected to select lots that only had gains. While I will have to pay 15% capital gains tax on them, I anticipate paying this or higher at any future point. So I’m basically just bringing forward the payment of the taxes today and resetting the cost basis when I elect to reinvest the $30k at today’s prices.

Just wanted to make a note that you could potentially reverse a wash sale situation if you catch it soon enough. Thanks again to all who replied to the thread!
OP, thanks for the update. Needless to say I had no idea you can change the SpecID of the tax lot post-facto. So thanks, this is a great thread for me.
Just FYI, not all brokerages allow this. Like at Vanguard you have to specify the lots as part of the order request.
I had to specify the lots as part of the order request at Fidelity as well. But they still let me change the lots two business days thereafter.
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Arena08
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by Arena08 »

rkhusky wrote: Tue Aug 09, 2022 9:03 am
Arena08 wrote: Mon Aug 08, 2022 8:54 pm Just a quick follow up in case anyone finds themselves reading this in a similar situation in the future. I’ve definitely saved all the information in this thread for future reference, but I was able to undo my wash sale. Although I made the original sale of the $30k on a Friday, Fidelity gave me until the following Tuesday to change which actual specific lots were selected for sale. In order to avoid the paperwork drill of the form 8949 and having 1099’s that didn’t match the cost data I was filing with the IRS, I elected to select lots that only had gains. While I will have to pay 15% capital gains tax on them, I anticipate paying this or higher at any future point. So I’m basically just bringing forward the payment of the taxes today and resetting the cost basis when I elect to reinvest the $30k at today’s prices.

Just wanted to make a note that you could potentially reverse a wash sale situation if you catch it soon enough. Thanks again to all who replied to the thread!
I probably wouldn't have paid so much ($300+) to avoid a couple entries on a tax form, but I expected to be in the 0% LTCG tax bracket in retirement.
Point well made rkhusky. And thanks very much for sharing all your expertise. In my case I expect to remain in the 15% bracket, so I was less concerned with the taxes due to swapping lots.
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squirrel1963
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Re: My First Inadvertent Wash Sale - Please Help Me Fix!

Post by squirrel1963 »

Arena08 wrote: Tue Aug 09, 2022 7:11 am You bet, Squirrel! I’m glad it’s been helpful for you as well. I know that this has been a real learning experience for me. This forum is an incredible resource of incredible folks, and I count myself lucky to be a member.
Yup me too. I credit John Bogle and BH forums for having made my retirement possibile.
I would have just wasted money on high ER funds with poor returns otherwise, doing performance chasing and still having to work.
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