Can I recover from wash sale after closing the entire positions?
I have a question about wash sale. When I sold part of my stock A, I triggered wash sale then I got an adjusted cost base for the remaining stock A, say, 00.
What I found on the internet is that, if I close the position of stock A, I could recover the disallowed loss, which means I could use the adjusted cost basis (in this case 00) to offset any gains I may have.
For example, if I have 00 gains so far, after I close the position A, I would have a total gain of 00. Am I right on this? Thank you so much.
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Yes, you will eventually recover from the wash sale. The loss is just deferred, not eliminated. When you sell your entire position, the only instance where you wouldn't be allowed to realize your entire loss would be if you purchased replacement shares in a tax-advantaged account like an IRA (because any basis adjustment there is irrelevant). This link goes over various scenarios.
The fact is that if you incur a wash sale, the loss is disallowed and must be added to the cost basis of the second position and carried forward. More on this scenario with various examples can be found at The Motley Fool web site:
www.fool.com/taxes/wash-sales-and-worthless-stock.aspx
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