Understanding Wash Sale

[aim-high]

Hi,
I have been reading about Wash sale but I dont think I quite understood it yet. My basic understanding is that Wash Sale will come into picture if you sell a stock at a loss and I buy the same kind of stock within 30 days.
Can someone explain if I will be hit with Wash sale loss disallowed situation for these 2 use cases ?

1. Lets assume I trade with EVGO stock.
Nov 8 - Bought 100 shares @ 16.00
Nov 8 - Sold 100 shares @17.00
Nov 9 - Bought 100 shares @15.00
Nov 9 - Sold 100 shares @16.00
Nov 10 - Bought 100 shares @14.00
Nov 10 - Sold 100 shares @15.00

In the above case, I am just doing day trading. Every time I buy at a price, I sell above the buying price. I am not selling at a loss but will wash sale come into picture since Nov 10th purchase price is lower than Nov 8th purchase price.


2. Similar stock but I am averaging the cost.
Nov 8 - Bought 100 shares @16.00
Nov 9 - Bought 100 more shares @ 15.00 My average cost is 15.50 for 200 shares
Nov 10th - Sold 200 shares at 15.75
Nov 11th- Bought 100 shares at 15.25
Nov 12th - Sold 100 shares at 15.65

In this case, on Nov 10th, I am selling at a cost higher than average cost BUT lower than initial purchase of 16.00. Also, my Nov 11th buying cost (15.25) is lower than Nov 9th average cost (15.50). I am selling at a profit compared to my purchase price.

Thanks

[btctony]

I believe that you are over thinking this. You cannot claim a loss for tax purposes on any of that. Also, averaging doesn't come into play. If you sell a stock at a loss and rebuy the same stock within 30 days, you cannot claim that loss for tax purposes. You create a cost basis when you buy a stock. If you sell above that cost basis, you pay cap gains tax on it. If you sell below that cost basis, you create a cap loss, which you can write off, if you do not buy it back within that 30 day time frame. There are different methods of calculation that are acceptable to the IRS, but the most common is FIFO (First In-First Out).

[aim-high]

Thanks Btctony. In my use cases above, i am not selling at a loss so i dont have to worry about wash sale correct ?

[disneysteve]

In my use cases above, i am not selling at a loss so i dont have to worry about wash sale correct ?

In your second example, you did sell at a loss.

Nov 8 - Bought 100 shares @16.00
Nov 9 - Bought 100 more shares @ 15.00 My average cost is 15.50 for 200 shares
Nov 10th - Sold 200 shares at 15.75

The lot you bought on 11/8 was sold on 11/10 at a loss of $0.25/share or $25.00. Since you repurchased the same stock on 11/11, you would not be able to claim that loss at tax time.

[aim-high]

Perfect. thanks guys for making me understand.

--Sunray