Tax Wash Rule

I am not a tax accountant and would welcome someone with that area of expertise confirming my details.

In order to take advantage of a loss on you taxes when you sell a stock you can not buy it 30 days before or after selling it. This rule is called the "Wash" rule. I am considering selling some of my $4+ shares so I can take a loss. In theory, the last day you can buy shares of Sirius is 11/28/08 and then sell higher priced ones on 12/31/08 and be able to claim a loss.

I am not giving up on Sirius. In fact, I have been accumulating again in recent months but it would be foolish to pass up a tax loss on a relatively small percentage of of my total shares

i remember reading that, 30 days after the sale you can't buy again into that stock or a similar stock, but it may have changed

This is definately something that you should discuss wih a PROFESSIONAL, and not take the advice of someone on the boards who may or may not be correct.

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Originally Posted by Newman

This is definately something that you should discuss wih a PROFESSIONAL, and not take the advice of someone on the boards who may or may not be correct.

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I agree with Newman, this is something you should consult with whomever does your taxes - but you are generally correct.

BTW, the Wash Sale Rule doesn't prevent you from buying again -- it just effects your cost basis. If you take a $1,000 loss and then buy back too early, then that $1,000 can no longer be claimed -- and instead, that $1,000 is added to your new cost basis.

https://www.gainskeeper.com/glossary_WashSales.html

Definately recommend talking to your tax guy who can go over it with you.



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I wasn't looking for tax advice but was thinking aloud whether any other shareholders were thinking of selling off some shares for tax purposes.

My taxes are fairly simple and I do them myself. The rule seems straight forward. I fortunately have only had the opportunity to sell off shares for a tax loss once before and that was to offset the gain from when Cingular bought AT&T Wireless. This year there are no gains :( on anything. I am sure I am not alone in that.

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Originally Posted by James

I wasn't looking for tax advice but was thinking aloud whether any other shareholders were thinking of selling off some shares for tax purposes.

My taxes are fairly simple and I do them myself. The rule seems straight forward. I fortunately have only had the opportunity to sell off shares for a tax loss once before and that was to offset the gain from when Cingular bought AT&T Wireless. This year there are no gains :( on anything. I am sure I am not alone in that.

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These days, most of the brokers offer the alternative of selling you stock by blocks. In other words, you can call your broker, sell your $4.00 dollar stock block and declare a loss. Etrade & Fidelity offer that alternative. It is quite simple.

This is what Tax Cut Premium (2007) has to say about the issue:

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Originally Posted by TaxCut

Wash Sales
A wash sale occurs when you sell or otherwise dispose of stock or securities (including a contract or option to acquire or sell stock or securities) at a loss and, within 30 days before or after the sale or disposition, you:

Buy substantially identical stock or securities,

Acquire substantially identical stock or securities in a fully taxable trade, or

Enter into a contract or option to acquire substantially identical stock or securities.
You cannot deduct losses from wash sales unless the loss was incurred in the ordinary course of your business as a dealer in stock or securities. The basis of the substantially identical property (or contract or option to acquire such property) is its cost increased by the disallowed loss. For more details on wash sales, see Pub. 550.

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Here is the link to the IRS: Publication 550: Wash Sales.
I was very interested to learn of the calculation for the cost basis. That is definately a consideration.

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Originally Posted by Siriusowner

These days, most of the brokers offer the alternative of selling you stock by blocks. In other words, you can call your broker, sell your $4.00 dollar stock block and declare a loss. Etrade & Fidelity offer that alternative. It is quite simple.

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My online broker allows you to pick which shares to sell so I can sell the higher priced ones for maximum effect. I can sell all or some at a given price level. Of course, if a lot of people and funds, which don't like hold losing stocks past year end, start selling en masse, I would forgo selling and be a buyer. If Sirius reaches the 5-10 cents range at year end I would buy not sell.

Another question, might fit here; sorry to bring up old post.

Prior to the merger, does the wash rule for "substantially identical" stocks apply to a buy of XMSR following a sell of SIRI within the +/-30 day window?

I think it does; however my Gainskeeper reports the buy as not being a wash, but GK could be wrong. I am waiting on a reply from IR and TDAmeritrade; not sure if I'll get one.

I would consider it "substantially identical" because the XM converted to SIRI, but then again I am just guessing.

thanks Newman.

I just received this from TD Ameritrade client services which may be useful,

"
Purchases of XMSR prior to the merger would not be considered "substantially similar" because the two stocks were still separate companies. Securities are considered substantially similar if they can be converted to the sold security at the holders request. Examples of substantially similar securities include call options, warrants/rights, or convertible bonds for the security sold at a loss. Since the merger was decided by the companies, and you did not have the choice to elect for conversion, XMSR was not considered substantially similar. This being said, the purchases of XMSR were converted into the SIRI history in GainsKeeper, and may trigger future wash sales if you sell the converted shares for a loss, and repurchase shares of SIRI within the wash sale window."