The “Wash Sale”, a New Popular Tax Reporting Item

This year (tax year 2011), we are seeing more Wash Sales reported on tax returns. While we are not sure if this due to tax reporting or rebalancing results due to the latest years volatile capital market, we wanted to alert you.

A Wash Sale in its basic form is the loss of a tax deduction due to the purchase and sale of an asset without enough time-lapse. Since we are not CPA’s (disclaimer), we wanted to give you an important statement from the detail page of the IRS Publication 550. 

Deduction Suspended, Not Lost !

Before you call your congressman or let your blood pressure rise, read the following. The most important sentence in the IRS Wash Sale detail, in our opinion is as follows:

“This adjustment postpones the loss deduction until the disposition of the new stock or securities.”

In simple terms, most likely the loss is only delayed due to timing. Our bet is there will be adjustments to these laws in the near term as this net has been casted a bit wider than many may have expected.

We are finding the various tax software package questions somewhat confusing leading to more questions and reporting than normal in years past and wanted to give you a heads up! Again, we are not CPA’s, so consult your professional before acting, but you now know what we are seeing!

Have a Great Day!

JK

214-706-4300

www.jkfinancialinc.com

  

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