[GNC] Wash sale recording

[Stan Brown (using GC 4.14)]

On 2024-12-17 10:43, R Losey wrote:
> So, early this year, I (unwittingly) did a wash sale. I have heard of wash
> sales before, but I had made an invalid assumption.

You have my sympathy. The wash-sale rules are annoyingly complex, and
IMHO the tax money the Treasury gets doesn't justify the record-keeping
complexity for people who are not in the business of buying and selling.
(People who are in that business aren't subject to the wash sale rule.)

And if you have automatic reinvestment of dividends, that creates a wash
sale if you sell any shares within 30 days before or after receiving the
dividend.

> In case anyone else doesn't know, in the US, if you sell a stock for a
> loss, and repurchase it within 30 days, you are not allowed to claim the
> capital loss. This is called a "wash sale".

Two notes:
(1) It's a wash sale if buying and selling take place within 30 days of
each other, regardless of which comes first.
(2) If you buy less than you sold, you can still claim a capital loss on
the shares sold that exceed the shares bought. Below you say you sold
100 shares and bought 50; thus you can still claim capital loss on the
100-50 = 50 shares that you didn't repurchase.
(2a) As you noted in your transaction template, you can't claim the
capital loss on a wash sale, but you can add the nonallowed capital loss
to your basis in the shares purchased.

Reference: Publication 550, starting at page 56
<https://www.irs.gov/pub/irs-prior/p550--2020.pdf>
(I'm not a tax expert, but I've participated in discussions on
misc.taxes.moderated so I'm pretty sure I've got this straight.)

> I am trying to work out how I properly record this in GnuCash. I have
> worked out something (based upon what an accountant said), but I wanted to
> run it by this group as a check.
> 
> Anyway, I sold all my shares (100) in stock X for a loss of Y and the
> following week purchased 50 shares.
> 
> So, I have recorded this as two multi-split transactions.
> 
> In the stock X account, split #1
> DEBIT: sale price to the sweep fund
> DEBIT: long term capital gain with Y (I supposed technically, it's a
> "negative credit" because it's a loss, but this works)
> CREDIT: selling 100 shares of stock X at the sale price
> CREDIT: cost basis of stock X (again, technically, a negative debit, but
> this works)
> 
> One week later, in the stock X account, split #2:
> DEBIT: purchase 50 shares of stock X for the cost
> DEBIT: cost basis of wash sale (Y)
> CREDIT: long term capital gain with Y (to zero out the loss that I cannot
> claim, and to add it to the cost basis of stock X)
> CREDIT: sweep fund for cost of purchase
> 
> Does this seem the correct way to go about this? (it definitely leaves a
> zero LT capital gain for stock X, which is what I needed to have happen).

I'm not sure you do. Only 50 shares of the sale are wash sale; the other
50 are an ordinary capital loss, either short- or long-term depending on
how long you held them. (See "More or less stock bought than sold" near
the end of page 56 of Pub 550.) From these two transactions I think you
should end up with a negative in your Capital gain/loss account in GC.

P.S. If you incur commissions and fees, remember that these affect your
basis also.

Stan Brown
Tehachapi, CA, USA
https://BrownMath.com