@Linkman–So here was the problem I posted:
Miller, an individual calendar-year taxpayer, purchased 100 shares of Maples Inc. common stock for $10K on July 10, 2012, and an additional 50 shares of Maples Inc. common stock for $4K on December 24, 2012. On January 8, 2013, Miller sold the 100 shares purchased on July 10, 2012 for $7K. What is the amount of Miller's recognized loss for 2013 and what is the basis for her remaining 50 shares of Maples Inc. Stock?
Timeline: 07/10/12 Bought 100 shares for $10K
12/24/12: Bought another 50 shares for $4K
01/08/13 (less than 30 days after buying 50 more shares): Sell original 100 shares for $7K
If he hadn't bought the other 50 shares then the recognized loss on the original 100 would have been $3K. BUT he did buy the other 50 shares so technically it was like swapping 50 shares for 50 shares of the same stock and only really selling 50 shares from the original set. 50/100=50% so you can only recognize 50% of the $3K loss that would have been recognized without the additional purchase. The remaining 50% gets added to the basis of the second purchase. So recognized loss = $1,500 and the basis for the remaining shares =$4K + $1,500 of the loss not recognized = $5,500.
I hope that didn't make it more confusing. Remember that it is considered a wash rule if the second purchase occurs within 30 days (before or after) the sale.
CPA Exam - Finally DONE (November 2014)
BEC (08/10/13) 80
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FAR (04/12/14) 81
REG (07/19/14) 69 (11/29/14) 87!!
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