Conference nyoss1::market_investing

    You have definitely created a wash sale. Do a DIR/TITLE=wash in this
    and the Digital Investing Notes conference for several discussions.
    You haven't done away with you losses. You just can't claim them
    against the gains associated with the ESPP stock.

    re: .0
    
    I think you still have a chance to fix this situation by selling all
    the shares you'll purchase on Dec. 1, 1993. But, don't quote me on
    this. I am sure some people here know about this better than I do.
    
    Mike

Yup, you goofed.

Of course, there is still a VERY HIGH PROBABILITY of your NOT getting caught as
long as you do not sell your Dec 1 purchase date stocks for the next 3 years.
The probability of an audit catching up to you in that sort of paper trail
(again, as long as you don't sell the Dec purchase) is about as high as you
getting a Bob Palmer raise this year.   Three years after your filing date, if
you are audited, you are not required to bring the 1993 returns.  Unless, of 
course, they have reason to suspect you intentionally defrauded the IRS.

I would never recommend tax fraud/cheating to a client.  I would never do this
myself.  I offer the above simply as an academic exercise.  Besides, is it
REALLY worth cheating?  For just 28% of the loss and at that, you can only
claim $3K loss this year?


For What It's Worth.......

    This is what my accountant tells me :
    
    "if you create a wash sale, meaning selling a stock and purchasing it
     within 30 days of the same calendar tax year, the loss is disallowed
     by IRS.  However, you do not loose this lost, you know add this loss
     to the cost basis of your next purchase".
    
    Since I did not have time to get too much detail from him you should
    check this with your own accountant.  From what I understand if you
    sell 1000 shares of XYZ at $10 (with a loss of say -$4000) and then 
    buy that stock at say $9, the $4000 loss is disallowed, but, the cost 
    basis for your new purchase is as follows:
    
    	1000*9 + Commission + 4000 (from wash)= about $13,000.
    
    The usual disclaimers apply.

>    This is what my accountant tells me :
>    
>    "if you create a wash sale, meaning selling a stock and purchasing it
>     within 30 days of the same calendar tax year, the loss is disallowed
                            ^^^^^^^^^^^^^^^^^^^^^^
                           
Does this mean a sale on 12/31/93 for a loss, followed by a buy on 1/2/94
is not considered a wash?  Hmmm...

- Chris
    

    I think I need to differ. If the stock were being bought and sold in
    the open market, all that has been said about a wash sale applies  if
    you buy it back within 30 days it is as if you never sold it. I believe
    that a different situation applies to the ESPP. I THINK that since the
    purchase is made with monies which have accumulated over a long
    periond, the accounting is handled differently.
    
    One piece of data which supports this thinking is the time period for
    whic you must hold ESPP stock in oirder to have the difference between
    purchase price and value be considered capital gain as opposed to
    ordinary income. IRS rules say the holding period is two years. BUT, in
    ESPP, the start of the holding period is determined by the STARTING
    date of the buy period, not the buy date. So, the start date of the
    12/1/93 ESPP purchase is July 1, 93 and July 1 is the start date of the
    holding period.
    
    I would not automatically conclude that .0 has executed a wash. I would
    talk to an accountant who specifically is familiar with stock purchase
    plans, not just stock transactions in general. Or, try the folks who
    manage the espp program. I doubt that this is the first time this has
    come up.  

     
    re .6
    
    A sale on 12/31/93 of DEC stock is somewhat fuzzy. In my opinion,
    looking at the prospectus, it puts the buy date no later that 1-dec
    and it could be argued that the buy date is actually the last day of
    November since that is the end of the period.
    
    Peter

Re .7

Since it is possible to calculate a capital gain or loss at any point,
regardless of whether the basis is fair market value or actual purchase
price, your argument is irrelevant to the IRS.  A share is a share,
whether purchased on the open market or via ESPP.

Re .8

If you look at your ESPP statement, the purchase date is listed as 12/1,
not 11/30.  You could try to argue that a sale on 12/31 was not within the 
30 days, but I'll bet you'd lose.

Ok, i have a question.

I have a bunch of stock I bought > 6 months ago via ESPP.
In the last 6 mos, i also bought 100 and sold 100 (more then 30 days ago).
I just got more via ESPP on 1-dec.

can i sell the entire lot (or various parts of it) w/o incurring the
dreaded wash rule?

	Here's my scenario.

	Bought stock at 25.
	Sold January calls for $30.
	Stock is currently about 45 and my calls will be excercised in most
	likelyhood. 

	I would like to buy back the calls and get a capital loss this year. 
	I would like to sell the stock in 1994, but as early as possible and 
	take the gain in 1994.  

	Does the wash rule apply here? Do I have to wait until 60 days for
	the wash rule to not apply?

    My understanding is that for the wash rule to apply, you will need to
    trade the SAME product.  In your case I guess the Calls of XYZ stock
    and the "XYZ" stocks are two different thing.  So, I guess the wash
    rule does not apply if I understood your scenarion correctly.

    Better check your IRS documentation. The quote is "similar" investments
    and I'm nearly certain options are treated identically to the common
    stock itself.

	Re. .11-.13

	I checked with my accountant and the wash rule does apply :-(. 

	The stock is 3COM. Any opinions on its outlook for the next two months?

    I have a question about mutual funds and the wash sale rules.

    For stocks, if you purchase shares 30 days before or after a sale of
    the same stock that resulted in a loss, some or all of the loss may
    be disallowed.  But once you sell the shares that created the wash,
    the loss can be taken.

    But what do you do with mutual fund shares when you create a wash sale
    but you have been using the "average cost basis" for your taxes?  When
    can the loss be taken?  Only after you have sold all the shares in that
    mutual fund??

    thanks,
    -dave

    re: .15
    
    >But what do you do with mutual fund shares when you create a wash sale
    >but you have been using the "average cost basis" for your taxes?  When
    >can the loss be taken?  Only after you have sold all the shares in that
    >mutual fund??
    
    If you don't select the "specific identification" method when selling
    your first shares, I'm pretty sure the IRS expects you to use the FIFO
    method (you sell your oldest shares first).               

>>                       -< the default is FIFO, I think >-

    Right, the default is FIFO, but I'm not using the default, I'm using
    the "average cost basis" method.  In this case, one uses the average
    cost of all the shares bought so far as the basis for shares sold
    when calculating capital gains/losses.

    But then I didn't sell any specific shares, but rather these 'phantom'
    shares that cost exactly as much as the average of all the other
    shares.  Does that make sense??

    -dave

    re: .17
    
    >Right, the default is FIFO, but I'm not using the default, I'm using
    >the "average cost basis" method.  In this case, one uses the average
    >cost of all the shares bought so far as the basis for shares sold
    >when calculating capital gains/losses.
    
    The IRS Pubs don't seem to cover this case explicitly.
    
    The "generic" wash sale rules direct you to add the disallowed loss to
    your cost basis. Since you're using "average cost basis," that suggests
    you increase your average cost basis by the amount of the disallowed
    loss.
    
    Definitely get an opinion from a qualified source, of which, I am not.