A wash sale occurs when an individual sells or otherwise disposes of stock or securities (including a contract or option to acquire or sell stock or securities) at a loss and within the 30 days before or after the sale or disposition does any of the following:
- Buy substantially identical stock or securities
- Acquire substantially identical stock or securities in a fully taxable trade
- Enter into a contract or option to acquire substantially identical stock or securities
- Acquire substantially identical stock or securities for their IRA or Roth IRA
A sale and purchase with the same broker within the 30-day time frame that results in a loss is indicated on Form 1099-B with an amount in Box 1g "Wash sale loss disallowed" or on a brokerage statement with adjustment code "W". If you are aggregating 1099-B short-term and long-term transactions in the tax return, this transaction cannot be included with the aggregate but will need to be entered separately.
Note that wash sales can also occur if within the 30-day time frame a taxpayer is buying and selling the same stock with different brokers, or the taxpayer's spouse is buying and selling the same stock, or a corporation either of them controls is buying and selling the same stock. These transactions won't have a wash sale indicated on Form 1099-B or the brokerage statement, but they are wash sales nonetheless.
A dealer in stocks or securities can deduct a loss for what would otherwise be a wash sale if it was incurred in the ordinary course of trade or business. Otherwise, if the wash sale is not deductible, the unallowed loss is added to the basis of the stock subsequently purchased.
To enter a wash sale on Form 8949 in TaxSlayer ProWeb, from the Federal Section of the tax return (Form 1040) select:
- Capital Gains and Losses
- Capital Gains and Loss Items
- + Add a Capital Gains Transaction - For a MFJ return, select if for the taxpayer, the spouse, or both.
- Description of Property - Use a description similar to the description on Form 1099-B.
- Date Acquired - If reported on Form 1099-B, enter the date in Box 1b.
- Date Sold - If reported on Form 1099-B, use the date in Box 1c.
- Sales Price - If reported on Form 1099-B, enter the amount in Box 1d.
- Select cost basis type - three options are available:
- Box 12 Cost Basis Reported to the IRS - Select if the check box in Box 12 (after 2018) or Box 3 (2018 and prior) is checked.
- Box 12 Cost Basis NOT Reported to the IRS - Select if the check box in Box 12 (after 2018) or Box 3 (2018 and prior) is not checked.
- Form 1099-B Not Received - Select this if the transaction was not reported on Form 1099-B, e.g., reported on Form 1099-S or not reported on any form.
- Cost - If reported on Form 1099-B, use the date in Box 1e unless the basis needs further adjustment, e.g., it has already been increased by a previous wash sale.
- Adjustments - If an amount is entered on Form 1099-B Box 1g, or an adjustment code of "W" for wash sale is indicated on the brokerage statement, select W and enter the nondeductible loss amount in the Adjustments field as a positive number.
When finished with the transaction, click Save & Enter Another if you have another capital gain or loss transaction to enter, otherwise click Continue.