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Your capital gains taxes will be figured using this adjusted cost basis. Your broker will generally (though not always) figure wash sales for you, so you usually won’t have to do it yourself.
After a sale is identified as a wash sale and if the replacement stock is bought within 30 days before or after the sale then the wash sale loss is added to the basis of the replacement stock. The basis adjustment preserves the benefit of the disallowed loss; the holder receives that benefit on a future sale of the replacement stock.
In other words, unless you select a different cost-basis election before selling, your investment firm will report your loss or gain using the default. If you sell securities and your sale price is lower than your cost basis, you have a capital loss. That loss, in turn, can help offset taxable gains elsewhere in your portfolio.
The capital gain that is taxed is the excess of the sale price over the cost basis of the asset. The taxpayer reduces the sale price and increases the cost basis (reducing the capital gain on which tax is due) to reflect transaction costs such as brokerage fees, certain legal fees, and the transaction tax on sales.
The cost basis of an asset is important to you for two primary reasons – tax planning and investment planning. These two reasons are related because only with the proper investment planning can ...
Most simply, if "tax-loss harvesting is not done properly, it will create a wash-sale that will eliminate the tax benefits of the buying and selling". [9] The investor can employ a number of techniques to avoid triggering the wash sale rule. The investor can wait 30 days to repurchase the security. [10]
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Basis (or cost basis), as used in United States tax law, is the original cost of property, adjusted for factors such as depreciation.When a property is sold, the taxpayer pays/(saves) taxes on a capital gain/(loss) that equals the amount realized on the sale minus the sold property's basis.