I bought a stock on 4/14/08 for $40 and sold it on 4/17/08 for $30. Then I bought the same stock on 4/24/08 for $20 and sold on 5/2/08 for $10. I lost $10 disallowed from the previous sale to the cost basis of the second purchase. That is $30. But I sold the that stock for $10. The lost this time (considering the disallowed from the first added to the cost basis) is now $20. DOES THIS $20 DISALLOED BECAUSE OF SECOND WASH SALE or CAN I TAKE THIS TAX DEDCUTION?


IF YOU HAVE EXPERIENCE IN TAKING TAX DEDCUTIONS AND HANDLING WASH SALES PLEASE HELP

You report that second sale just as you figured - you add the $10 disallowed loss on the first sale to the cost basis of the second - so that tarnsaction becomes a loss of $20. So at the end of the day you end up with a $20 loss (just as if the wash sale rules didn't exist).

You report both transactions on Schedule D. List that first sale, with the actual cost and sale prices, and a loss of ($10) in column f. Then on the next line write "Wash Sale" and put +$10 in Column f. Then list the second transaction with a cost basis of $20+$10=$30 and a sale price of $10, for a loss in column f of ($20).

See: http://www.irs.gov/publications/p550/ch04.html#en_US_publink100010601