Wash Sale Rule - Please Help Me Understand?

I have asked this question before and have not received an answer to it. If you day trade (Buy and Sell) ETFC numerous times throughout the months of Jan-June, but did not trade the stock for the rest of the year, would there be wash sales? All trades were completed within 30 days of one another. Sometimes in the same day. I have heard if you don't trade in that particular stock for 30 days or, just don't trade in December or January, the trades would not be considered wash sales at the end of the year. By the way, I have no open positions in any stocks, and have decided not to trade in January at all. (No stock trading or future contracts)





Also, I did not trade just ETFC, but numerous others as well. CFC, MSFT, and so forth....





I have not traded in any stocks since June 08, but have started trading future emini contracts (ES, NQ, YM). I was a newbie and did not know about the wash sale rule. Now I'm nervous about filing taxes.Wash Sale Rule - Please Help Me Understand?
The wash sale rules apply if you make a loss on the sale of any security and also purchased the same security withing 30 days before or after the sale.





Example: On January 20, I buy 100 shares of company X. On February 5, I sold those 100 shares of company X at a loss. If I have any other purchases of Company X between January 7 (30 days before February 5) and March 6 (30 days after February 5), then I have a wash sale.





You then add the a part or all of loss on the February 5 sales to the cost of the other purchase of Company X stock to get its cost basis.





The wash sale rules are supposed to be used to report gain/loss on trading, although if you can prove that not following them had no impact on the reported result, there would be no consequence. However, not following the wash sales rules will usually impact the reported gains or losses during the year.





One situation where failure to follow the wash sale rules for a stock will not have an impact on your reported gains or losses is:


(1) You held none of the stock on January 1 of the year and bought none of it in December the year before.


(2) You held none of the stock on December 31 of the year and bought none of it in January the year after.





Richard K


Master tax Advisor


HR Block





This advice was based upon my understanding of the law in effect at the time it was written as it applies to the facts provided by you. See my profile for more infromation.