Wash sale if option assigned shares are sold in 30 days?

Financial Planning Tax Strategies
1

I own1000 shares in a company which were acquired many years ago in multiple lots which have a large unrealized LT gain. I had a short put option for 200 shares which were assigned to me 5 days ago. These assigned shares have an unrealized ST loss.

If I were to sell these 200 shares within the 31day period since acquisition, will it be considered a wash sale?

If it is a wash sale, to which lots of the LT holding will the cost basis be added to?

Thanks

2

Not unless you acquired other new shares within 30 days before or after the sale of this lot of stocks. The wash sale rule requires that you both sell at a loss and purchase new shares in the same 61 day period.

That said - if you are, for instance, doing dividend reinvestment on your LT holdings, the shares that you acquire through the dividend reinvestment are considered to be new purchases - so you would have to check the timing of any loss sale vs. that acquisition to see if you had a wash sale.

AJ

3 Likes
3

Your broker might allow you to specify the lot.
Ask them?

If you just sell 200 shares without specifying the lot, you will likely sell some LT… And if these are “gain”, then you won’t have a wash sale?

If you want to “harvest” the loss for tax purposes, talk to you broker about specifying the lot?

:alien:
ralph

4

In this day and age, I would find another broker if my broker didn’t allow me to specify which lots of a stock to sell. You may need to specify the lot before the sale executes, but some brokers even allow you to specify a lot after the sale executes, but before it settles.

It will be FIFO if the lot is not specified, per IRS rules, so based on the scenario described, not specifying the new lot would result in a gain. Since wash sales require that there be a loss on sale, there is no possibility of a wash sale if the lot is not specified.

AJ

4 Likes
5

Other than the 200 assigned shares, I haven’t acquired any other shares in the previous 31 days and won’t acquire any in the subsequent 31 days after the sale.

My broker does allow lot specification up to the settlement date of the sale. They allow setting a default for all sales e.g. highest cost, lowest cost etc and overriding it for an individual order.

Thanks for your responses.

1 Like