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Old 02-03-2015, 09:22 AM
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Short sale and long stock purchase combo. Is it a wash?

Situation:

Mark buys $40000 worth of the XYZ stock in his business 401K account. Few minutes later he short sells $40000 worth of the XYZ stock in his regular brokerage account.

Four months later he sells the XYZ stock for $50000 in his business 401K account. Few minutes later he covers all of the XYZ stock for $50000 in his regular brokerage account.

After all these transactions he seems to have lost $10000 in his brokerage account and he made $10000 profit in his business 401K account.

Question:

How is Mark going to handle this situation when he does his taxes next year? Does he have a $10000 capital loss in his regular brokerage account or is this a wash sale situation? He was trying to create some losses in his regular brokerage account to get $3000 loss deduction.



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