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Old 02-25-2019, 07:15 PM
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Wash Sale Question when Selling Options

Hi. I understand wash sales to the point that they are disallowed loses when you buy the stock back within 30 days and that you get to recapture the unrealized loss on the new purchase when it is sold. My problem is how do I adjust the cost basis of the new position on Selling Puts. Here is what I'm dealing with as an example:

I'm looking at Form 8949 after I imported all my trades. It has the following information simplified for the security with a wash sale

a- Put ORCL b- date acquired 3/23 (sold put) c- date disposed 3/26 (bought to cover and sold - rolled) d- Proceeds -$400 e- Cost Basis 0 f- W g- $250 h- Gain or loss $-150

On 4/20 I bought to close the Put which shows on the import like:

a- Put ORCL b- date acquired 4/20 (bought to cover) c- date disposed 4/23 (Not sure why this 4/23) d- Proceeds $1000 e- Cost Basis 0 f- empty g- empty h- Gain or loss $1000

Because of the way options are report as just the gain or loss with no cost basis, how do I adjust for the $250 wash loss in the 4/20 transaction? Do I just change the $1000 to $750 in both places and enter some code for (f)? I'm at a loss.

Part 2 of the question. For the same situation where I had a wash sale on 12/21/18 and I bought to cover a roll on 1/7/2019, how do I handle this? Do I just leave the wash sale entries as is and next year adjust the 1/7/2019 cost basis?

Thank You!



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Old 02-26-2019, 08:14 AM
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Because of the way options are report as just the gain or loss with no cost basis, how do I adjust for the $250 wash loss in the 4/20 transaction? Do I just change the $1000 to $750 in both places and enter some code for (f)? I'm at a loss.===========> say, aslongas the loss is disallowed by the IRS because of the wash-sale rule, then, you have to add the loss to the cost of the new security, which becomes the cost basis for the new security.

Part 2 of the question. For the same situation where I had a wash sale on 12/21/18 and I bought to cover a roll on 1/7/2019, how do I handle this? Do I just leave the wash sale entries as is and next year adjust the 1/7/2019 cost basis?===========>>>>>as said. Yes. The way the wash sale works is your loss is added to yourcost basis of the buy.



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Old 02-26-2019, 08:56 PM
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Originally Posted by Wnhough View Post
Because of the way options are report as just the gain or loss with no cost basis, how do I adjust for the $250 wash loss in the 4/20 transaction? Do I just change the $1000 to $750 in both places and enter some code for (f)? I'm at a loss.===========> say, aslongas the loss is disallowed by the IRS because of the wash-sale rule, then, you have to add the loss to the cost of the new security, which becomes the cost basis for the new security.

Part 2 of the question. For the same situation where I had a wash sale on 12/21/18 and I bought to cover a roll on 1/7/2019, how do I handle this? Do I just leave the wash sale entries as is and next year adjust the 1/7/2019 cost basis?===========>>>>>as said. Yes. The way the wash sale works is your loss is added to yourcost basis of the buy.
Thank you so much for the reply. Yes, I understand that I add it to the cost basis and I've done this several time with normal stocks where they show the buy and sale price. My question (and maybe your "yes" answer was meant for this also) is with options they just show the gain or loss. No cost basis or sale price so don't know how to adjust to cost basis other than what I mentioned to adjust the gain or loss provided by the amount of the wash sale. Also if that is correct, do I have to enter a code like the "w" they entered for the wash sale to explain the adjustment?

Thanks again.



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Old 02-27-2019, 09:15 AM
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Originally Posted by cpoldedana View Post
Thank you so much for the reply. Yes, I understand that I add it to the cost basis and I've done this several time with normal stocks where they show the buy and sale price. My question (and maybe your "yes" answer was meant for this also) is with options they just show the gain or loss. No cost basis or sale price so don't know how to adjust to cost basis other than what I mentioned to adjust the gain or loss provided by the amount of the wash sale. Also if that is correct, do I have to enter a code like the "w" they entered for the wash sale to explain the adjustment?

Thanks again.
My question (and maybe your "yes" answer was meant for this also) is with options they just show the gain or loss. No cost basis or sale price so don't know how to adjust to cost basis other than what I mentioned to adjust the gain or loss provided by the amount of the wash sale. ========>. then you , in my opinion, you may , as you want to do, adjust the gain/loss from the wash sale; The cost basis of shares acquired through an incentive stock option is the exercise price, shown in box 3. The cost basis for the entire lot of shares is the amount in box 3 multiplied by the number of shares shown in box 5. This figure will be used on Sch D and Form 8949 taxpayers without wash sale or other adjustments to cost-basis may simply enter totals from broker 1099-Bs directly on Sch D and skip filing a Form 8949. After all, the IRS gets a copy of the 1099-B with all the details. The best accounting solution for generating a correct and compliant Form 8949 is trade accounting software that?s compliant with Section 1091. Don?t just rely on a Form 1099-B Wash sale rules are a huge problem for active securities traders; non-compliance is widespread and the IRS is not enforcing the rules. That is unsustainable


Also if that is correct, do I have to enter a code like the "w" they entered for the wash sale to explain the adjustment? ==============>no doubt about this; there is no penalty in entering a proper code to explain the adjustment; it is rather idealistic.



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Old 02-27-2019, 10:15 PM
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Originally Posted by Wnhough View Post
My question (and maybe your "yes" answer was meant for this also) is with options they just show the gain or loss. No cost basis or sale price so don't know how to adjust to cost basis other than what I mentioned to adjust the gain or loss provided by the amount of the wash sale. ========>. then you , in my opinion, you may , as you want to do, adjust the gain/loss from the wash sale; The cost basis of shares acquired through an incentive stock option is the exercise price, shown in box 3. The cost basis for the entire lot of shares is the amount in box 3 multiplied by the number of shares shown in box 5. This figure will be used on Sch D and Form 8949 taxpayers without wash sale or other adjustments to cost-basis may simply enter totals from broker 1099-Bs directly on Sch D and skip filing a Form 8949. After all, the IRS gets a copy of the 1099-B with all the details. The best accounting solution for generating a correct and compliant Form 8949 is trade accounting software that?s compliant with Section 1091. Don?t just rely on a Form 1099-B Wash sale rules are a huge problem for active securities traders; non-compliance is widespread and the IRS is not enforcing the rules. That is unsustainable


Also if that is correct, do I have to enter a code like the "w" they entered for the wash sale to explain the adjustment? ==============>no doubt about this; there is no penalty in entering a proper code to explain the adjustment; it is rather idealistic.
Thank You for the help!



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