Someone please help me.

I am looking at my 2012 1099-B from TD Ameritrade, and cannot for the life of me figure out how they calculated disallowed wash-sale losses. If I had just one account, there'd be no problem -- I'd simply trust their numbers, report them to the IRS and be done with it. The problem is I have another account with Optionshouse, and have incurred wash-sale losses in trading the same securities -- with overlapping dates -- from both accounts. Therefore, I must figure out how to calculate disallowed wash-sale losses so I can jibe the wash-sale losses from the two accounts on one Form 8949.

Here's an actual example from my 1099-B: On Jan. 3, I sold 150 shares of SPXL and had a gain of $521.59 (the cost basis was $9,116.23 and the proceeds were $9,637.82).

Later that same day, I bought a fresh 151 shares of SPXL and sold them three days later on Jan. 6 for a loss of $1.97 (cost basis was $9,649.69 and proceeds were $9,647.93). So ... I had a wash-sale loss of only $1.97, but my 1099-B says that the disallowed wash-sale amount is $64.46!

How, specifically, does one arrive at a disallowed loss of $64.46 when the loss itself is only $1.97? In other words, what is the formula one uses to arrive at the $64.46 disallowed loss?

Someone pull-eeze help me. Thank you.

P.S. The 1099-B at least correctly added the $64.46 to the cost basis of the next batch of SPXL shares I bought a week later on Jan. 13, for whatever that's worth.

Regarding my previous message, at the end under "P.S.": Maybe I should have included information about the shares I bought on Jan. 13 following the disallowed loss of $64.46 -- I bought 117 shares of SPXL for $7,844.59 (includes the disallowed loss of $64.46 from my sale of 151 shares on Jan. 6).

Thanks again.

Here is very simple example of wash sale; Ingrid enters into the following transactions with regard to Pacif corp common stock; date;



date transaction amount
Jan 4 , 2001 purchases 600 shares $30K
Oct 2 2007 purchases 400 sh $10K
Oct 12, 2007 sells 600sh $12K
Oct 20 2007 purchases 200 sh $5K
Oct 25, 2007 purchases 300 sh $8.4K
Because Ingrid purchases more than 600 shares within 61 day period before and after the date of sale(the purchases made on Oct 2, 20,25), the recognition of the entire loss of $18K($30K-$12K) is postponed. Four hundred shares(2/3 of the number shares sold) are purchased on Oct 2 and 200 shares(1/3) are purchased on Oct 20. Thus the basis of the 400 shares of stock purchased on Oct 2 is $22K($10K purchase price+($18K disallowed *0.667). The basis of the 200 shares of stock purchased on Oct 20 is $11K($5K+($18K disallowed loss * 0.333). both of these blocks of stock have a holding period that starts on Jan 4 2001. The basis of the 300 shares of stock purchased on Oct 25 is its purchase price of $8.4K. its holding period begins Oct 25.

@Wnhough:

I appreciate your response to my plea, but your response does not answer my question.

To reiterate, "how, specifically, does one arrive at a disallowed loss of $64.46 when the loss itself is only $1.97?"

The crux: How can a disallowed loss be LARGER than the loss itself?

I guess you need accurate professional help from yur broker; there's no way to tell whether you'll be affected by the wash sale rule without doing an analysis of all your trades for the trnsactions.As said previously, the disallowed loss adds to the basis on the repurchased stock thereby increasing any future loss or reducing any future gain. You need to rely on brokerage firm to track that information. If you have a single broker, I would rely on the broker report to include wash sales. If you have multiple brokers (or even multiple accounts at the same broker) you need to keep track of wash sales. Sold at a loss and bought the following week at E*Trade can not possibly show up as a wash sale anywhereSo you keep a list of pending wash sale adjustments in the perm file.

It turns out it is impossible to have a disallowed wash-sale loss that is higher than the wash-sale loss from whence it came.

My confusion stemmed from my 1099-B. It suggests that the 151 shares in question were sold as 1 lot. However, they were sold in 2 LOTS. It is the sale of the second lot that resulted in the $64.46 wash-sale loss and, of course, the disallowed wash-sale loss of the same amount.

Bye.

“It turns out it is impossible to have a disallowed wash-sale loss that is higher than the wash-sale loss from whence it came.”==========>As you can see, wash sale concept applies only to losses; your disallowed loss doesn't just go up in smoke. Instead, it gets added to the basis of the replacement securities. When you sell them, your disallowed loss effectively reduces your gain or increases your loss on that transaction.
If the number of replacement shares purchased during the forbidden 61-day period is less than or greater than the number of shares sold in the loss-sale transaction, then, the following result will happen;Say, you bought 100 shares of ABC Co. on Dec. 1, 2011, for $2K. You then bought an additional 50 shares on March 1, 2012, for $1.2K and another 25 shares on March 10, 2012, for $650. On March 27, 2012, you sold all the December shares for $1.3K, thus incurring a $700 loss. However, since you bought 75 replacement shares within 30 days of the loss sale, 75% of your loss ($525;75/100) is disallowed. You can deduct the other 25% ($175;25/100). Add two-thirds of the disallowed loss ($350; 50/75) to the basis of the 50 shares bought on March 1. Add the remaining $175 of disallowed loss(25/75) to the basis of the 25 shares bought on March 10. So the basis of the 50 shares becomes $1.55K ($1.2K plus $350;$350<$1.2K) and the basis of the 25 shares becomes $825 ($650 plus $175;$175<$650). Also, you get to extend the holding period for both sets of shares by the Dec. 2, 2011, through March 27, 2012, holding period of the 75 shares for which the loss was disallowed.
Another example, say, you bought 100 shares of ABC Co. on Dec. 1, 2011, for $2K. You then bought an additional 100 shares on March 1, 2011, for $2.4K and another 50 shares on March 10, 2012, for $1.3K. On March 27, 2012, you sold all the December shares for $1.3K, thus incurring a $700 loss. Since you bought 150 replacement shares within 30 days of the loss sale, your entire loss is disallowed. In this case, you add the entire disallowed loss to the basis of the first 100 replacement shares, which are those purchased on March 1. So the basis of those shares becomes $3.1K ($2.4K plus $700). You also get to extend the holding period for those shares by the Dec. 2, 2011, through March 27, 2012, holding period of the 100 shares for which the loss was disallowed.

“My confusion stemmed from my 1099-B. It suggests that the 151 shares in question were sold as 1 lot. However, they were sold in 2 LOTS. It is the sale of the second lot that resulted in the $64.46 wash-sale loss and, of course, the disallowed wash-sale loss of the same amount.”======> The broker filed the 1099-B with the IRS and sent the copy to your client so he can use the information to file on his tax return. When you buy or sell stock, your broker is required to send you a 1099-B. The 1099-B reflects all of your profits and losses during the tax year. If you notice an error on your 1099-B, it is best to contact your broker to request a corrected 1099-B. If the broker refuses to submit a corrected 1099-B, notify the IRSthat you are disputing the information that appears on the form. Perhaps you may write in the Detailed Explanation section, a detailed explanation of why you are disputing the information on your 1099-B. The primary reason to identify individual stock lots for sale is to minimize taxes. If you have already taken capital gains during the year, you could choose tax lots that are trading at a loss to help offset those gains. If you wish to sell only a portion of a winning stock, you might consider selling tax lots with the smallest gain to minimize your capital gains tax. Conversely, if you have already booked losses for the year, you might take advantage of this opportunity by selling tax lots with larger gains, which would remain untaxed to the extent of your losses.