Understanding Wash Sales

Proceeds vs. cost basis

The total proceeds reported on the 1099 tax form is the sum of the proceeds reported on all reported sales adjusted for wash sales. Please note, the total proceeds has no correlation to your account balance and does not consider any deposits or withdrawals made to the account.

The total cost basis reported on the 1099 tax form is the sum of the cost basis reported on each transaction adjusted for wash sales. Please refer to the example below for information on how the cost basis may be adjusted for wash sales.

Wash sales & adjusted cost basis

A wash sale occurs when an investor sells a security at a loss and then purchases the same or a substantially similar security within a 61-day period—30 days before or after the sale. In such cases, the loss is disallowed and cannot be claimed. Keep in mind, wash sales do not apply under a section 475 election (Mark-To-Market election).

If your loss is disallowed due to wash sale rules, add the disallowed loss to the cost basis of the new stock or securities. This adjustment becomes your basis for the new stock or securities and delays the loss deduction until you sell the new holdings. Additionally, the holding period for the new stock or securities includes the holding period of the stock or securities you sold.

Please refer to the following scenario regarding the reporting and effect of wash sales and adjusted cost basis:

• Purchase 1,000 shares of $ABC at $50 per share. The total traded value is $50,000.
• Sell 1,000 shares of $ABC at $45 per share. The total traded value is $45,000. With a $5 loss per share on 1,000 shares, the total loss amounts to $5,000.

Within 30 days of the sale, the customer buys 1,500 shares of $ABC at $40 per share, resulting in a traded value of $60,000. Since this purchase occurs within 30 days of selling the security at a loss, the $5,000 loss is disallowed and added to the cost basis of the new share lot.

The adjusted basis for the 1,500 shares purchased at $40 per share is calculated as follows:

• 1,000 shares at $40 per share equals $40,000, plus the $5,000 disallowed loss, totaling $45,000. Adding the cost of the remaining 500 shares at $40 per share, which equals $20,000, results in an adjusted cost basis of $65,000.
• Sell 1,500 shares at $47 per share, with a total traded value of $70,500. The total profit is $5,500.

To verify if you have incurred a wash sale, please download and review your transaction records. This data includes all your purchases and sales. For more information on how this rule applies to your situation, please consult a licensed tax advisor.

Desktop:

1. Navigate to Account.
2. Once you've entered your trading password, select Orders ➝ Export Orders.
3. Confirm date range and email. Select Ok.

Webull does not provide tax advice. For personalized guidance regarding your tax situation, including reporting requirements and tax implications, please consult with a licensed tax professional. If you have any additional questions or require further assistance, please reach out to us through the in-app Help Center or call (888) 828-0618. We are available Monday through Friday, from 9 AM to 4:15 PM EST.