Key insights
- The wash sale rule disallows deducting losses if you buy the same or substantially identical stock within 30 days before or after selling it at a loss. In this scenario, if all positions are closed in November and remain closed for 31 days, the disallowed losses are added to the cost basis of the replacement shares. Since there are no replacement shares in this scenario, the losses are carried forward to the next tax year. If total gains equal total losses, there is no net capital gain to be taxed.
Very simple scenario
You trade the same stock 50 times a day for 11 months. You win some, you lose some.
Your total gains equals your losses for this single stock. You also don’t trade for 31 days starting November 30th.
What happens to the wash sale disallowed losses? Supposedly they are carried forward to the cost basis of the next stock purchase.
Long story short. In this scenario, will I have a large amount of disallowed losses and yet still have to pay capital gains tax at the end of the year?
Edit: all positions are closed in November and stay closed.