Wash Sale Questions: Why Is Only Part of My Loss Disallowed?
The wash-sale rule prevents a taxpayer from claiming a loss while immediately restoring substantially the same economic position.
The 30-day window
A wash sale can arise when substantially identical stock or securities are acquired within the applicable period around a loss sale. The commonly tested window looks 30 days before through 30 days after the sale.
The loss is deferred
In a typical taxable-account replacement purchase, the disallowed loss is generally added to the basis of the replacement shares rather than disappearing permanently.
Partial replacement
If 100 shares are sold at a loss and only 40 substantially identical shares are repurchased in the wash-sale period, the disallowance generally corresponds to the replacement shares rather than automatically disallowing the loss on all 100 shares.
Example
Suppose the total loss on 100 shares is $2,000, or $20 per share. If 25 replacement shares are acquired within the wash-sale period, a $500 portion may be disallowed and added to the replacement shares' basis under the standard framework.
Watch the dates
The rule can look backward as well as forward from the loss sale. Do not assume only repurchases after the sale matter.
The takeaway
Match replacement shares to loss shares. A partial repurchase can create a partial loss disallowance.
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FAQ
Is the wash-sale window only after the sale?
No. The applicable window also looks at acquisitions before the loss sale.
What happens to the disallowed loss?
In a typical taxable replacement transaction, it is generally added to replacement-share basis.
What if only half the shares are repurchased?
Only the corresponding portion of the loss may be disallowed under the matching rules.