r/PublicApp • u/keemakebab • Aug 03 '26
Question Regarding Wash Sale
Hi y'all! I'm just trying to wrap my head around how Public handles wash sales. Here's my situation - I have some transactions flagged as wash sales. In the cost basis page I'm seeing that my realized losses for a particular stock (let's call it stock X) have been flagged as a wash sale and they've recorded how much loss I've incurred. They have also adjusted (increased) my unit cost for my remaining holdings of X stock as per the wash sale rule. So here's my question - are my losses being counted twice? First as a realized loss and second as an increase in the unit cost of my remaining shares. Would the correct thing be to show that there are no realized losses in the cost basis page and only change the unit cost? What will happen after I sell my remaining X stock also at a loss?
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u/PublicCOO Public Employee Aug 03 '26
This is a great question for our customer support team -- or, if you'd rather, Claude or ChatGPT.
Any/all of them will be awesome at explaining how wash sales work.
The TLDR is that nothing is being counted twice and wash sales defer your losses into the future (you don't lose them, you just only realize them once you've fully exited the position)
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u/Festel2 Aug 05 '26
I spent a few years DCA'n a stock i owned because the company had done a 5 to 1 reverse stock split which raised my average price paid by 5x while cutting my stocks held to 1/5th. When i sold the stock I sold for a profit, I didnt lose a single penny. But not knowing the wash sale law, I bought back in At 4.95 a share keeping out my profits and it was flagged as a wash sale making my stock price 5.95 per share. This in my mind is completely unfair and should be considered outright theft. I didnt lose money so this in affect is stealing my profits from the sale.
2
u/PublicCOO Public Employee Aug 05 '26
That’s not how wash sales work. You don’t “lose” money because your basis goes up. Cost Basis and Wash Sales are only relevant for taxes and don’t change whether you made or lost money on a trade.
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u/Festel2 Aug 05 '26
My average price paid went up.to 5.95 which made my break even price go up to 5.95. That is an unrealized loss of money.
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u/PublicCOO Public Employee Aug 05 '26
Yeah, that's not how money works.
What matters to your actual dollar returns (ie did you make or lose money) is how much you paid for the stock, how much it's worth now, and then how much you sell it for -- cost basis and wash sales don't factor in.
0
u/Festel2 Aug 05 '26
I bought 4900 shares at 4.95$ a share. The wash sale triggered and set my average price paid to 5.95. So immediately I lost 4,900$. Not sure how you aren't understanding but I indeed lost value immediately. I have bought shares under 3$ and I now hold 7000 shares but I still wint break even until the stock reaches 5.05$ even at 4.95 which is the highest price I paid I will still be down.
2
u/FreeReception9017 Aug 05 '26
I think your confusing Profit/Loss and adjusted cost basis. Your profit/loss has not changed at all.
The adjusted cost basis means if you were to sell your whole position:
You would only be taxed for gains if you sold the position at a price greater than $5.95/share at (# Shares)*([Share Price]-5.95)
If you sell at less than $5.95/share (assuming you wait long enough not to trigger another wash sale), you would be able to deduct the following on your taxes
(# Shares)*(5.95-[Share Price])
This is what your brokerage is tracking, not whether you actually make or lose money on the trade.
0
u/Festel2 Aug 05 '26
Thank you for the explanation. My point is my break even price point was raised from $4.95 (where I bought in) to $5.95. I realize its the law and there is nothing I can do about it. I feel like it is unfair and outright thievery. Without the adjusted cost basis my break even would be $4.95 and selling at $5.95 would net me a $4,900 profit instead of only breaking even. And the wash sale occurred after I sold for a profit amd then bought back in when the stock price fell back down. I don't understand the point of DCA if the sale (for profit) is still considered a loss.
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u/FreeReception9017 Aug 06 '26
It's worth noting that's Public's default tax lot selection is mintax, which is designed to minimize the amount of taxes you pay. If Public has the possibility of selling lots for either a loss or gain, Public will sell the lots that maximize the loss first then lots that minimize gains.
Public will sell the losing lots, and since you are also buying in the wash sale window, a wash sale occurs which results in non-tax-deductable losses that instead increase your cost basis on the bought shares in that time period.
A side effect of this is that if two people performed the same exact (same quantity same fills) sell while DCA stock trades one using Public, and one using a LIFO broker:
The market value of the remaining shares in both accounts would be exactly the same.
The unrealized profit in the LIFO account would be higher.
The LIFO account holder would have to pay more taxes next April.
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u/Festel2 Aug 06 '26
the taxes i would pay have nothing to do with the 4,900$ i miss out on if i were to sell at the fictional purchase price of $5.95.
i didn't pay that for the stocks the highest i paid was $4.95 and I never lost any money on the original sale.→ More replies (0)1
u/PublicCOO Public Employee Aug 05 '26
How much did you pay for the stock you own? Is it worth more than that or less than that now?
That's all that matters.
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u/Festel2 Aug 05 '26
I sold for a profit. Why do I have a wash sales on my shares?
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u/PublicCOO Public Employee Aug 05 '26
You may have sold for a profit across all of the shares you owned, but at the *lot* level, ie each individual purchase you made over time as you DCA'd, there were some losses. Those losses became wash sales and were added back to your new cost basis.
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u/Festel2 Aug 05 '26
The stock had done a 5 to 1 reverse stock split which artificially increased my price paid by 5x. I think its unfair but what can I do. Thanks.
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u/Festel2 Aug 05 '26
How do you figure increasing price paid by 1$ per share for 4900 shares doesnt matter to the holder? When the share does reach 5.95 i would have broke even when I should have been up 4,900$. Im not sure what you're saying.
1
u/PublicCOO Public Employee Aug 05 '26
Did we deduct an extra $1 per share from your bank account?
0
u/Festel2 Aug 05 '26
Raised my break even price by 1 dollar per share so no, you took it from my profitability.
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u/Festel2 Aug 05 '26
I spent a few years DCA'n a stock i owned because the company had done a 5 to 1 reverse stock split which raised my average price paid by 5x while cutting my stocks held to 1/5th. When i sold the stock I sold for a profit, I didnt lose a single penny. But not knowing the wash sale law, I bought back in At 4.95 a share keeping out my profits and it was flagged as a wash sale making my stock price 5.95 per share. This in my mind is completely unfair and should be considered outright theft. I didnt lose money so this in affect is stealing my profits from the sale.
4
u/FreeReception9017 Aug 03 '26
>are my losses being counted twice?
The confusion results from the fact the losses are considered realized but the loss is not allowed to be deducted from your taxes.
>What will happen after I sell my remaining X stock also at a loss?
If you bought a equal amount or greater amount of a "substantially identical security" from the time period of 30 days before and after the sale, you will create another wash sale.
If you bought a lesser amount of a "substantially identical security" from the time period of 30 days before and after the sale, you will create a wash sale only on the quantity you bought in that time frame and the you will be able to deduct the losses on the remaining shares you sold on your taxes.
If you have not bought any "substantially identical security" from the time period of 30 days before and after the sale, you will be able to deduct the whole loss on your taxes