Wash Sales Compliance is intended to foster discussion of wash sales processing in the context of the broker cost basis reporting requirements enacted  under the Emergency Economic Stabilization Act of 2008 (Pub L 110-343).

While the basics of the wash sales rules are fairly widely understood, a full analysis of the rules reveals significant complexity when applied to real world investment activity.  For example, losses may be deferred by multiple partial replacement positions established prior to and/or subsequent to the incurrence of loss.  Deferred losses may be later realized by multiple partial disposals, each of which may then be partly or fully subject to additional deferrals.  Losses may in fact be deferred in whole or in part, repeatedly and indefinitely until such time as all descendent components of the original loss are realized and remain so beyond the period during which they may be re-deferred.  Complete and accurate wash sales reporting requires independent calculation and tracking of each of the described loss components.  Additional complexities include combinations of long and short activity, tracking deferred losses across corporate action and other portfolio bookkeeping activity, and reprocessing wash sales after retroactive modifications to basis or activity.  Further complexities involving activity in related accounts and substantially identical property will not be addressed here as they are specifically excluded from EESA broker reporting requirements.

In addition, there are numerous ambiguities in the relevant current code (Sec 1091) and regulations (Reg 1.1091-1, Reg 1.6045-1, and Reg 1.6045A-1) pertaining to the calculation and reporting of wash sales.  Existing guidance is light, and as made abundantly clear by the results of tax year 2011 reporting, numerous problems result from varying interpretations.

The forum presents discussion of various complexities and ambiguities and invites commentary from knowledgeable industry participants with the aim of promoting correct and consistent wash sales processing and ultimately more accurate and useful broker reporting.

The forum is moderated.  Off topic, ad hominem or otherwise abusive comments will be removed.  Questions from individual taxpayers about specific treatment will not be posted or addressed — individual investors with wash sales related questions are encouraged to visit the Faimark Forum at http://www.fairmark.com/forum/

Neal Ruskin
Chief Technology Officer
Silver Management Group, Inc.

A recognized expert in cost basis portfolio accounting and investment tax reporting with over 17 years experience, Mr. Ruskin leads product development of Silver’s suite of brokerage processing components (BPC Suite) and serves as strategic business and technology advisor for Silver’s brokerage and clearing clients.  Prior to joining Silver Management, Mr. Ruskin served as Chief Enterprise Architect at TD Ameritrade, Chief Technology Officer at TAHO Commerce Group, and Technical Director at CheckFree Investment Services.  Mr. Ruskin holds a bachelors degree in political economics from Princeton University and a masters in industrial design and human factors from The Pratt Institute.

Founded in 1991, Silver Management delivers cost-effective, risk-controlled investment services solutions through a specialized combination of business domain expertise, consulting services, and software technology.  The Silver team applies decades of hands-on experience and deep subject matter expertise in securities brokerage operations, cost basis reporting, and wealth management to support a range of investment services initiatives and ensure project success.  In addition, Silver leverages its enterprise-class Brokerage Processing Components (BPC Suite) software to accelerate deployment of end-to-end solutions.

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