Mr. and Mrs. Smith purchased 100 shares of stock for $45 per share on June 30, 20X6. On March 30, 20X8, the Smith family decides to sell these shares for $30, generating a loss of $15 per share. On April 15, 20X8, the Smith family realized they made a mistake and repurchased 100 shares for $35 per share. When will the Smith family receive a tax benefit for the loss on the March 30, 20X8, sale?
What will be an ideal response?
The Smith family will have a ($1,500) long-term capital loss. They had held the original stock for over a year; thus, the loss would be categorized as long term. However, the loss cannot be deducted on the 20X8 tax return. The wash sale rules disallow the deduction because the Smith family sold and purchased similar stock in the same company within 30 days of selling the original shares. However, the loss is added to the basis of the newly acquired stock. Thus, the basis of the new stock is $5,000 or $3,500 (100 shares × $35) plus $1,500 (the disallowed loss).
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