Substantially Identical Securities (SIS) Handling

 

The SIS rule is complicated and vaguely defined by the IRS. Parts of the rule are impossible to get an authoritative answer. However, it doesn't mean the entire SIS rule can be ignored especially relating to option trading when a wash sale is deemed obvious. For example, there is a wash if you sold a stock at a loss and purchased an option to call that stock within the 61-day window (30 days before and after). Similarly, there is also a wash if you sold a stock at a loss and short an In-The-Money-Put option within the 61-day window. The reason is simple; there is a wash if the new position is synthetically equivalent to the original position when buying/shorting the option after taking a loss on the stock.

Until IRS clarifies the wash sale rule on option losses, we have no way of knowing how IRS will rule different expirations and strikes. A different agent may have a different interpretation. Even experts have different points of view. As such, Offwall Calc provides a list of wash methods to handle the popular interpretations of the Substantially Identical Securities rule.

Offwall Calc performs two types of calculations for you, namely Simple Calculation and Wash Calculation. Simple Calculation ignores all wash sale rules like how you can simply plot your trades on Excel spreadsheet to figure your gains and losses. Wash Calculation is performed using a Wash Method chosen by you. The calculator automatically compares results between simple and wash calculation to make sure disallowed losses won't be lost forever (which happens with some calculators we tried before we developed our own).

Depending on which wash method you choose for your wash calculation, the following table summarizes when a wash sale will be triggered under different methods. A check mark indicates a wash sale for the given trading scenario. If you are an investor, please consult your tax advisor to determine which (if any) of the following wash method is right for you. If you are a professional trader, you don't need to be concerned with which wash method to use because you will not be filing with reports generated from Wash Calculation.

NOTICE: If you trade only 1 type of security, you probably don't have to worry about voliating rules on Substantially Identical Securities. For example, if you trade only stocks where there is no one stock is substantially identical to another, you can choose any WASH METHOD for your wash calculation because they will all produce the same results (since scenarios such as B, C, D, F, G, I, J, K, M, N, O, Q, R, S, U, V, and W should never occur).

SCENARIO
WASH METHOD
Loss due to
New position acquired within Wash Sale period
#1 #2 #3 #4 #5 #6
Buy and sell equity/stock A Buy same equity/stock
B Buy any call option (or SSF) of the same equity/stock
C Short deep In-The-Money put option of the same equity/stock
(any expiration that is deep in the money)
D Short any put option of the same equity/stock
Short and cover equity/stock E Short same equity/stock
F Short any call option (or SSF) of the same equity/stock
G Buy any put option of the same equity/stock
Buy and sell call option (or SSF) H Buy call option (or SSF) with the same expiration and strike
I Buy any call option (or SSF) of the same underlying equity/stock
J Short any put option of the same underlying equity/stock
K Buy the underlying equity/stock
Short and cover call option (or SSF) L Short call option (or SSF) with the same expiration and strike
M Short any call option (or SSF) of the same underlying equity/stock
N Buy any put option of the same underlying equity/stock
O Short the underlying equity/stock
Short and cover put option P Short put option with the same expiration and strike
Q Short any put option of the same equity/stock
R Buy any call option (or SSF) of the same equity/stock
S Short the underlying equity/stock
Buy and sell put option T Buy put option with the same expiration and strike
U Buy any put option of the same equity/stock
V Short any call option (or SSF) of the same equity/stock
W Buy the underlying equity/stock
NOTES:
  • Different wash methods have different SIS triggers (indicated by on the table above). Method 1 turns off SIS handling. SIS handling gradually extends from method 2 to 6 as being the narrowest to the broadest wash trigger mechanism.

  • Method 6 is a catch-all method. It triggers a wash sale whenever you re-establish a position in the same (bearish or bullish) direction after taken a loss on a typical security. Notice that this catch-all method doesn't always work against you. If you buy and sell a stock at a huge loss, you might be able to claim the loss and still hold onto the stock. For example, you can purposely triggering a wash by selling (or buying) a very far Out-Of-The-Money put (or call) and subsequently repurchase the stock. This needs to be done at least one month before year end so that you can close option position before year end to take the loss. Also remember that you can't sell the stock within a month of selling the option. There is no perfect (standard) interpretation or method for IRS. If you look closely at all possible wash scenarios, a serious investor can plan on any consistent rule to minimize his/her disadvantage. Regardless, method 6 is probably the most unarguable because it is consistent with the general wash sale definition.

  • Method 3 and 4 are for advanced users who know the rules and implications. IMPORTANT: If you use method 3 or 4, you must set the deep in-the-money type flag properly when you enter your in-the-money-put-option transactions, otherwise Offwall Calc will have no way of knowing the fact that your put is deep in-the-money. Notice that method 5 and 6 do not have this restriction because 5C is covered by 5D and 6C is covered by 6D. That is because any put option includes deep In-The-Money put options.

  • Advanced users should take a closer look at methods 3 to 5. On method 3, for a loss as a result of a closing option position, our system will trigger a wash sale ONLY if the new position has the same expiration and strike. Calculation method 4 is the same as 3 with the addition of triggers covering the re-acquisition of any option positions on option losses.

  • None of our wash methods handle tax implications specific to straddles.
  • IMPORTANT: If you change your WASH METHOD from one tax year to another, it's likely that you need to re-base your transactions. See also Automated Annual Baselines.

 

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Wash Sale Watch
Wash Sale Watch can help you detect a wash sale before it happens. The tool checks your latest profit/loss report to detect potential wash sales in case you repossesss particular stocks or options position within a specific time window.

If there is a potential wash sale for buying or short selling a particular stock or option position within a certain time window, Wash Sale Watch will display the alert along with its expiration date to let you it is safe to repossess the stock or option position again. Knowing exactly when the wash sale window expires, you can plan on replacing stock or option positions without triggering a wash sale by violating the wash sale rule.

The tool also displays trades with recently closed wash sale windows as a reminder that it is now safe to repossess the stock or option position without tripping on wash sale regulations.


NOTES:
We generally don't recommend to avoid wash sale without reason. There are many articles and discussion forums on the Internet advising how investors can avoid wash sales (avoid violating the wash sale rule) without explaining all the pros and cons. An investor should understand all the pros and cons before deciding to avoid a particular wash sale.

Typically, there are 2 main reasons to avoid violating the wash sale rule:
  • Bookkeeping nightmare (but not anymore, there is Offwall Calculator to rescue!)
  • You are not allowed to deduct your losses with the IRS until you close out the replacement/repossessed position. It's important to know that those losses are simply delayed or added as cost on the replacement positions - you are not going lose those deductions unless you didn't track them properly. Therefore, as long as you close out the positions by year end, you will be able to take the accumulated loss if the overall turns out to be a loss.

But there are reasons NOT to avoid the wash sale rule:
  • You know the stock you sold at a loss recently will head toward a certain direction and the opportunity won't be there after the 30-day wash sale window.
  • You have complicated investment strategies involving stocks and option buying and writing. You need a way to balancing out your portfolio to maximize your profits and minimize tax liability by year end.

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Cross Account Wash Adjustments

 

As in reality, trades are only matched within the same account which means you can not buy a stock under one account and sell the stock with another. However, wash adjustments will apply across accounts. If you buy and sell a Stock at a loss in account #0000123, repurchasing the stock within the 61-day window will trigger a wash regardless of which brokerage or account you use to repurchase the stock. This is exactly what the IRS expects. If you trade with multiple accounts, you will need a calculator like Offwall Calc that has the ability to perform wash adjustment across different accounts.

 

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First-In First-Out (FIFO) and Specific Tax Lot Matching

 

Offwall Calc uses the First-In First-Out (FIFO) accounting method. Your trades will be matched on a first-in first-out basis for each of your investment accounts. Offwall Calc does not match orders across different investment accounts. For example, if you bought 100 shares of IBM using your individual Ameritrade account# 000001111 and you short 100 shares of IBM using your joint account (#000002222), it's obvious that these two IBM trades shouldn't be matched.

If you have multiple investment accounts, you should identify your trades with proper account numbers so that Offwall Calc can use them to prevent trades from matching across different investment accounts.

Specific Tax Lot Matching is similiar to trading with multiple investment accounts where you want to match certain trades separately. If you buy and sell a stock many times during the year but there are two trades that you want to identify as a specific tax lot match, you can assign a specific account number to achive that. For example, if you buy and sell MSFT many times under account#000003333 but there are two specific MSFT trades you want to identify as a match, you can change the account number from #000003333 to #0000013333 on the specific MSFT trades.

Account numbers are for matching purposes only but you should use a number that helps you remember the original account. Offwall Calc asks for a 9 digit account number. But you can use just the last four digits of your actual account number. This way, you can use the first 5 of 9 digits for Specific Tax Lot Matching purposes. For example, if one of your investment account's actual # is 3748328, you can use 000008328 as the account number for transactions made on that account. If another account's actual number is 62746536, you can use 000006535 as the account number for this account. So for Specific Tax Lot Matching, you use prepend any 5 digits to the actual 4 digit number. For example, use 000018328 as the first tax lot match and 000028328 as the second tax lot match from the same account that ends with 8328.

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Short Selling Wash Adjustments / Constructive Sale

 

The wash sale rule also applies to short selling. Offwall Calc tracks wash adjustments separately for bearish and bullish positions. It has no difficulty in handling frequent position reversals; e.g. as if you frequently shift from bullish to bearish positions and vice versa.

At Offwall.com, Short Against The Box within the same trading account will be constructed to a Sale automatically. When entering trades into Offwall's database, you will enter trades as either buy or sell transactions. Based on FIFO accounting, Offwall Calc automatically determines your buy transactions to be Buy to Open or Buy to Close and sell transaction to be Sell to Open or Sell to Close during the matching processes. Since trades are only matched within the same account, the actual transaction types determined are relative to individual accounts.

With Ameritrade (prior to its merger with TD), it allowed users to open long and short positions of the same stock at the same time. That clearly violated the Constructive Sale rule defined by IRS. Because Offwall Calc determines your trade type automatically based on FIFO within the same account, it will prevent simultaneously long and short open positions of the same instrument. If you have an open long position and subsequently short it on the same account, Offwall Calc will treat the short as a sell to close transaction. In other words, Offwall Calc will construct a sell-to-close transaction from the short whenever you short against the box. On the other hand, if you have a short position of a certain stock and subsequently enter a long position of the same stock, the long trade will be treated as a buy to close transaction.

If you buy a stock under one trading account and short the same stock under another account, Offwall Calc does not match trades across accounts so it will not constructed a sale (sell to close trade) from the short trade.

NOTES:
Buy to Close
is analogous to Cover, or Buy to Cover.
Sell to Open
is analogous to Short, or Sell Short.

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Accurate Holding Period Tracking and Basis Adjustment

 

When there is a wash, your holding period for the replacement stock will have to include the holding period of the stock you sold. The IRS designed this rule to prevent you from converting a long-term loss into a short-term loss. The trade date of the stock you sold would be carried over to the replacement shares. For example, you bought IBM on 2001/05/01, sold it on 2005/03/03 at a loss, and bought it back on 2005/03/04. Effectively, the shares you bought on 2005/03/04 will be treated as if they were bought on 2001/05/01. (NOTE: This does not apply to short selling because proceeding from short selling is always short-term gain/loss regardless of the holding period.)

For active traders, holding period and wash basis can be extremely difficult to track especially when there are replacements after replacements. Often, wash adjustments can not be combined and require separate tracking because one lot can be broken into many different lots. Different lots can have different wash bases and holding periods. With Offwall Calc, your holding periods will be accurately tracked regardless of the number of lots and times the stock has been involved in wash sale adjustments.

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Schedule D(1) Reports

 

It is easy to generate and print your Schedule D with Offwall Calc. There is no software to install. You can enter your trades individually on the add transaction page, import your trades by copy and paste from your broker's site, or upload your trades via CSV upload. When you click the "Reports" web page link, you will always receive 2 types of calculation reports - namely Wash Calculation and Simple Calculation. The Wash Calculation reports are generated by applying the wash method of your choice (default is method #6). The Simple Calculation reports are generated without wash methods and therefore ignored all wash sale rules.

Wash Calculation reports are for investors who are not classified as traders elected with MTM (Mark-To-Market) accounting. Simple Calculation reports are intended for professional traders who have chosen to file with MTM accounting. In theory, the overall net profit/loss should be identical for both types of reports. The difference between the two is when a capital loss can be claimed. Offwall Calc takes extra steps to make sure that nothing is neither lost nor inflated during the matching or wash calculation process. To ensure computation accuracy, in addition to other internal computation checks, Offwall Calc generates both types of reports and compares them for correctness. Both types of reports are presented to the user. Users are encouraged to compare and verify the reports on their own.

Our team tested many Schedule D generation programs prior to creating the first Offwall Schedule D calculator. We were alarmed by the miscalculations produced by the majority of programs tested. So when the team built the first calculator, the priority was that the calculator must show evidence that it indeed provided the correct results. With Offwall Calc, in addition to Schedule D reports, it also provides Comparison and Status Report for 1099B reconciliation and Match Reports to show exactly how transactions are matched. You don't want IRS to come knocking on your door for any reason relating to Schedule D. You certainly don't want to pay extra taxes or penalties due to an erroneous Schedule D report. As such, regardless of what software you use to generate your Schedule D, you should spend some time to verify your Schedule D reports prior to filing your taxes.

You can retrieve/view your Schedule D reports as often as you wish. However, you should not use the reports to file your taxes until all your transactions are accounted for wash adjustments for the given tax year. For example, you sold a stock at a loss on the last trading day of December and you bought it back in January (within 30 days). You must include the January transaction while calculating your Schedule D reports. If you are not sure whether your January transactions will trigger wash sales from the previous year, you must wait until February to generate your Schedule D reports. That way, you can include all transactions made in January. This does not mean that you should wait until February to work with Offwall Calc. In fact, our site is expected to be very busy between February and April. During peak times, we might need to disable certain features (such as transaction import or upload) to conserve system resources. Hence, we encourage you to get on our system early during off peak months. You can enter/upload your transactions in advance and learn how to use our system. You always can come back at a later time to finalize and retrieve your Schedule D reports.

Offwall strives to provide the most accurate Schedule D reporting service. However, Offwall and its associates are not responsible for the accuracy of the reports (please read our user agreement and/or disclaimer). You are responsible for making sure the reports are accurate. You can utilize the Comparison/Status and Match Reports to verify the calculations.

Our team has been using the calculator for the past few years. New methods are added and existing methods are modified when the calculator was migrated to the web to serve the public. We will be constantly updating its system to meet capacity and feature demands. Some changes may affect the accuracy of our calculation. To help us improve and bullet-proof our system, your feedbacks are valuable to us. We encourage our users to use our support forums.

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Automated Annual Baselines

 

Because Offwall Calc may employ a different wash interpretation (method) from the program you have used previously, the deferred losses are likely to be claimed at different times. Therefore, you do not want Offwall Calc to start calculating with transactions that are already reported to IRS. As such, you want Offwall Calc to pick up the calculation where you left off from the previous tax year. The open positions from the previous tax year will serve as a baseline for the current year. Open positions used as a baseline are also called baseline positions.

A baseline is the starting point of a calculation consists of baseline positions. It does not matter when and what you use to calculate your Schedule D, you need to have a valid baseline as a starting point to calculate your profits or losses for each tax year. Typically, a baseline consists open positions carried over from previous years. A baseline does not have to have open positions from the previous year. It can have open positions from January of this year but were adjusted for wash sales of the previous year. If you are new to Offwall and you have outstanding positions carried over from previous years, you need to create a baseline for those positions before entering them into Offwall's database. Like you would create baselines for any other calculator, the baseline must reflect adjustments made to the baseline positions. If your baseline positions contain deferred losses, you must include them or you will lose them forever.

If you change from one wash method to another and you have open positions, you also have to create a new baseline for the new wash method so that the open positions will be adjusted to include the deferred losses (if any). If you do not create a new baseline for a new wash method, you will not be able to claim your losses that were deferred due to wash sales.

If you have carryover open positions from previous years and you want to start fresh for a new tax year by excluding old transaction from the calculation, even if you use the same calculation method, you will also need to create a new baseline so that the open positions will be adjusted to include the deferred losses (if any).

Other programs often require new baselines for each tax year. With Offwall Calc, you are not required to use a new baseline for every tax year. You just need a baseline the first time you use Offwall Calc. If there are no changes to your chosen wash method1, you simply add new transactions to the database and generate your Schedule D report year after year.

In most cases, Offwall Calc does not require you to use a new baseline for a different tax year. However, Offwall Calc still provides the baseline positions report whenever you retrieve your Schedule D. For the following year, you may need to use these baseline positions as the baseline if you change your wash method or if you ever choose not to use Offwall Calc for whatever reason. For example, if you choose a different program or wash calculation method for the following year, you will be able to start fresh with the wash adjusted baseline positions created from the transaction you already filed with the IRS.

Offwall Calc's baseline positions include the latest open transactions in the database as oppose to baselines generated by other program. Baseline's generated by other programs usually cut off by the last transaction made for the given tax year. Offwall's baseline cuts off by the last transaction you entered in the database. If the database has transactions for the following tax year, a partial Schedule D may be generated to go along with the baseline that includes next year's transactions. Therefore, if you start your calculation from Offwall's baseline, you will need to include the partial Schedule D report that is generated by that year's partial data.

Whenever you change from one wash method or calculator to another, even if you have a valid baseline, some wash carryover attributes may be lost because the wash calculations were different. For example, the holding period might be extended or shortened; the deferred losses might be deferred further. There shouldn't be a problem as long as the overall profit/loss is the same. You can always compare your results with one calculation method/program to another starting with the same baseline. The results for a particular tax year can be different because they manipulate the wash rules differently. One might be more politically correct than the other, e.g. the other doesn't perform wash adjustments as it should. But the overall result must be the same because wash adjustments simply delay the claim of losses but eventually take the loss at a later date. If there is a difference in the overall profit/loss, someone is making a mistake somewhere. The mistake can either make you pay less or extra taxes. Either way can increase the likelihood of an IRS audit.

If you need to re-base (repopulate) your transactions in the database with your most current baseline positions, please follow these steps:

  • Save the proper calculation type of Outstanding Positions/Baseline Report as a text file. View it with Notepad.exe, Wordpad.exe, or your web browser to make sure it's a valid text file.
  • Save all the Schedule D Reports generated by existing transactions. Notice that you will need to combine reports if you get partial Schedule D reports. You will have partial reports if you get them for the same tax year before and after working with a baseline. For example, if existing transactions generate partial Schedule D reports for tax year 2006 and you also get reports for the same year after working with the baseline, you would need to combine the reports. You need to combine the partial reports because the baseline you work with doesn't include transactions that are already matched and recorded in the partial reports.
  • Download(export) all your existing transactions and save it as your pre-baseline records.
  • Delete all your existing transaction from the Offwall database.
  • Upload the saved Outstanding Positions/Baseline Report (from the 1st step above) to Offwall's database. After this step, your account will no long have transactions that are already matched and recorded onto Schedule D (and partial Schedule D) reports.

WARNING: Please notice that Offwall Calc will always generate 2 types of reports. Therefore, you will be presented with 2 types of outstanding/baseline position reports, namely from Simple Calculation and Wash Calculation. If you are going to work with a baseline, you should work with baseline positions from the calculation type you submit to IRS. DO NOT file your taxes with the Schedule D from WASH Calculation reports and work with the baseline produced by SIMPLE Calculation or vice versa.

NOTES:
1 Ideally, you can use the same wash method forever so that you will never need Offwall Calc to start from baseline positions other than the first use. However, Offwall cannot guarantee the correctness of the wash methods made available. In the event where your chosen wash method become obsolete (replaced by another method) for any reason, you will be required to repopulate your account with transactions starting with the baseline positions generated with your latest Schedule D filed with the IRS.

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Comparison/Status Report

 

The comparison/status report contains the calculation status and the comparison results between Simple Calculation and Wash Calculation. You should review this report before considering your Schedule D to be final for tax filing purposes. If you find errors or calculation discrepancies on this report and do not know how to resolve them, please visit Offwall's Wash Sale User Forum for help.

The Comparison and Status Report has 4 sections as described below.

Section I: Annual Sales Report

  • This section is the Annual Sales Report. You can use this section to reconcile your annual sales reported on your Schedule D with those reported on your 1099B. (For your Schedule D summary information, please see Section II)
  • You can compare your Actual Annual Sales with your Sales Reported on (Annual) Schedule D. The Actual Annual Sales is the total of all sell transactions for that year. The Sales Reported on (Annual) Schedule D is the total on the Schedule D generated by Offwall Calc. If you only trade stocks and you do not have short sale positions carried over from one year to another, your sales reported on your Schedule D should be identical to your actual annual sales.
  • If you have outstanding short sale positions for a given tax year (and if you are not a trader or didn't select Mark to Market), those outstanding short sales will not be reported on that year's Schedule D. However, your broker is likely to report all sell transactions (include shorts) to the IRS - see 1099B. In this case, your Schedule D may under-report your annual sales compare to the total expected by the IRS. The IRS expects your annual sales to be equal or greater than those reported on your 1099B. Under-reporting your annual total sales increases the likelihood of an IRS audit. If this is the case, you may need to attach a note with your Schedule D to describe the fact that you have outstanding short sale positions.
  • If you trade securities other than stocks, such as options or single stock futures (SSF), your broker may not report the proceeding of options and SSF. Most brokers report only stock sales on 1099B. In this case, your Schedule D's annual sales may be greater than the sales reported on 1099B. You do not have to explain to IRS if you report more than what the IRS expects.
  • The Annual Sales Report has 2 sub-sections. Section I(a) correlates with the Schedule D generated from Simple Calculation. Section II(b) correlates with the Schedule D generated from Wash Calculation. If you classify as a trader using Simple Calculation, you should reconcile your Schedule D and 1099B with Section I(a) of this report. If you are not classified as a trader, you should reconcile your Schedule D and 1099B Section I(b) of this section.
  • Example:

    SECTION I: ANNUAL SALES REPORT

    <<<<<< I (a) SIMPLE CALCULATION - Annual Sales Report >>>>>>

    ** 2005 Sales From SIMPLE Calculation **
    Year 2005 Actual Annual Sales:
      1773906.22
    EQ=1718900.84
    NoneEQ=55005.38
    Sales Reported On 2005 Schedule D:
      1650819.05
    EQ=1600840.27
    NoneEQ=49978.78
    Sales To Carryover Beyond This Year:
      123087.17
    EQ=118060.57
    NoneEQ=5026.60

    <<<<<< I (b) WASH CALCULATION - Annual Sales Report >>>>>>

    ** 2005 Sales From WASH Calculation **
    Year 2005 Actual Annual Sales:
      1773906.22
    EQ=1718900.84
    NoneEQ=55005.38
    Sales Reported On 2005 Schedule D:
      1650819.05
    EQ=1600840.27
    NoneEQ=49978.78
    Sales To Carryover Beyond This Year:
      123087.17
    EQ=118060.57
    NoneEQ=5026.60

    Section I(a) is the Simple Calculation annual sales. Subsection I(b) is the Wash Calculation annual sales. For average investors, the annual sales are usually the same for both calculation types.

    The above example contains the annual sales statistics in year 2005 for both calculation types. The actual annual sales in year 2005 is $1,773,906.22 where $1,718,900.84 is equity (stocks) sales and $55,005.38 is options/SSF (non-equity) sales. However, only $1,650,819.05 is reported on the Schedule D. Out of the $1,650,819.05 being reported, $1,600,840.28 is from equity (stocks) sales and $49,978.78 is from options/SSF (non-equity). In this example, the user has short sale positions carried beyond 2005 at the total value of $123,087.17 where $118,060.57 is from equity (stocks) and $5,026.60 is from options/SSF (non-equity).

    In the above example, the Actual Annual Sales differs from the Sales Reported on 2005 Schedule D due to short sale carryovers. If you do not have short sale positions carryover from one given year to another, your Actual Annual Sales should be identical to the Sales Reported on Given Year's Schedule D.

 

Section II: Schedule D(1) Summary Report

  • This section contains the summary of the Schedule D's for both calculation types.
  • Your Schedule D generated by Offwall Calc has the same format as the official IRS Schedule D Continuation Form. The Schedule D has 2 parts, PART-1 for recording short-term gains/losses and PART-2 for recording long-term gains/losses. Notice that Offwall Calc will not generate PART-1 for a given tax year if you do not have short-term gains/losses for that year. Similarly, PART-2 will not be generated if you do not have long-term gains/losses for that year. If you have both parts of the Schedule D, the summary report adds up both parts for you.
  • As described on Section I above, you must reconcile your Schedule D Annual Sales with the annual sales reported on your 1099B. Your Schedule D sales can be greater than the total on your 1099B if you trade options or other securities that your brokers do not report on the 1099B. But if your Schedule D Sales are less than the total on your 1099B, you should attach an explanation sheet on your Schedule D to explain the differences.
  • Example:

    SECTION II: SCHEDULE-D(1) SUMMARY REPORT
    <<<<<< TAX YEAR 2005 :>>>>>>
    SIMPLE CALCULATION :
         
    Schedule D NET P/L:
      11643.46
    ShortTerm=13252.95
    LongTerm= -1609.49
    Schedule D Entries:
      96
    ShortTerm=95
    LongTerm=1
    Schedule D Sales:
      1650819.05
    ShortTerm=1650439.05
    LongTerm=380.00
    Unreported Sales:
      123087.17 -- see Section I(a) carryover sales
           
    WASH CALCULATION :
         
    Schedule D NET P/L:
      -17594.09
    ShortTerm= -15984.60
    LongTerm= -1609.49
    Schedule D Entries:
      305
    ShortTerm=304
    LongTerm=1
    Schedule D Sales:
      1650819.05
    ShortTerm=1650439.05
    LongTerm=380.00
    Unreported Sales:
      123087.17 -- see Section I(b) carryover sales

    The above example contains the summary of Schedule D's generated for year 2005. It shows how Schedule D results vary from the two different calculations. The Wash Calculation Schedule D has a net loss of $17,594.09 as oppose to a net profit of $11,643.46 on the Simple Calculation Schedule D.

    On each calculation type's subsection, the first line containing the words "Schedule D Net P/L" contains the overall net profit/loss of your Schedule D for the given year. The second line containing the words "Schedule D Entries" contains the numbers of entries on your Schedule D report. The third line containing the words "Schedule D Sales" contains the total sales reported on your Schedule D report. You will see the fourth line (with the words "Unreported Sales") only if you have open short sale positions. Open short sale positions do not appear on your Schedule D report.

    Notice that your Offwall Schedule D may contain two parts where Part 1 is short-term gains/losses and Part 2 is long-term gain/losses. On your Summary Report, as illustrated in the above example, the first column of numbers contains the overall summary of your Schedule D, the second column contains the summary on Part 1, and the third column contains the summary for Part 2.

 

Section III: Annual Profit/Loss Statistics

  • This section is generated during the calculation verification process. The purpose is to make sure the overall profits/losses (P/L) are comparable between the two calculations (less deferred losses). In addition, this section of the report also serves as the summary of your annual profits and losses.
  • Example:

    SECTION III: ANNUAL PROFIT/LOSS STATISTICS AND COMPARISONS
       
    SIMPLE CALCULATION
     
    WASH CALCULATION
    YEAR
     NET P/L
    Deferred
    Accumulated
     NET P/L
    Deferred
    Accumulated
    2003
     -17332.63
     0.0
     0.0
     -16470.12
     0.0
     0.0
    2004
     -47330.69
     0.0
     0.0
     -16563.74
     0.0
    0.0
    2005
     11643.46
     0.0
     0.0
    -17594.09
     2391.90
     2391.90
    ALL
    -53019.85
    0.0
    0.0
    -50627.95
    2391.90
    2391.90

    The Deferred column contains the annual deferred losses. The Accumulated column contains accumulated deferred losses up to the given year. Deferred losses are wash sale losses yet to be claimed. Wash sale losses claimed will not be shown on these columns.

    As illustrated by the example above, the annual net profits/losses can be different between the two calculation types. However, the actual profits/losses should be the same between the two calculation types. The actual profits/losses are the overall net profits/losses minus the overall accumulated deferred losses (see numbers in cyan color).

 

Section IV: Annual Profit/Loss Statistics Per Underlying Symbol

  • Similar to section III. This section reports the profit/loss statistics per underlying symbol basis.
  • Example:

    SECTION IV: ANNUAL PROFIT/LOSS STATISTICS PER UNDERLYING SYMBOL
     
     
    SIMPLE CALCULATION
    WASH CALCULATION
    USYM
    YEAR
     NET P/L
    DeferralAccum
     NET P/L
    DeferralAccum
    MSFT
    2005
     -17426.38
     0.0
     -17426.38
     0.0
    MSFT
    2006
     433.02
     0.0
     433.02
     0.0
    MSFT
    ALL
     -16993.36
     0.0
     -16993.36
     0.0
    STEM
    2004
     
     -502.22
     0.0
     
     -502.22
     0.0
    STEM
    2006
     655.58
     0.0
    1889.89
     1234.31
    STEM
    ALL
     153.36
     0.0
    1387.67
     1234.31

    ( report continues with other underlying symbols )


    In this section, the annual profit/loss statistics breakdown by underlying symbol. Similar to section III, the annual net profits/losses can be different between the two calculation types. However, the actual profits/losses should be the same between the two calculation types. The actual profits/losses are the overall net profit/loss minus the overall accumulated deferred loss (see numbers in cyan color).

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Match Report and Consolidated Match Report

 

Offwall Calc generates a Match Report and a Consolidated Match Report for each calculation type. These reports contain the details on how your transactions were matched and adjusted while generating your Schedule D for each calculation type. The Match Report shows the annual match and adjustments. The Consolidated Match Report is the overall consolidated view without the annual breakdown.

Example:

Assume you have the these transactions in the database (shown in Offwall CSV format):

  2004-11-03, B, 380.00, 4269.49, XYZ, XYZ, E, 000000001, 0001001, 0.00, 0000-00-00, end
2004-11-04, B, 6.00, 693.49, XYZAC, XYZ, O, 000000001, 0001378, 0.00, 0000-00-00, end
2005-01-15, S, 380.00, 6183.35, XYZ, XYZ, E, 000000001, 0001476, 0.00, 0000-00-00, end
2005-01-15, S, 6.00, 976.32, XYZAC, XYZ, O, 000000001, 0001499, 0.00, 0000-00-00, end
2005-11-21, B, 100.00, 2681.74, ZZZ, ZZZ, E, 000000001, 0005606, 0.00, 0000-00-00, end
2005-11-23, B, 100.00, 2288.78, ZZZ, ZZZ, E, 000000001, 0005690, 0.00, 0000-00-00, end
2005-12-16, S, 100.00, 636.48, ZZZ, ZZZ, E, 000000001, 0005629, 0.00, 0000-00-00, end
2005-12-17, S, 50.00, 750.00, ZZZ, ZZZ, E, 000000001, 0006443, 0.00, 0000-00-00, end

For year 2005, you will be presented with a match report similar to the following:

WASH CALCULATION: MATCH REPORT FOR TRANSACTIONS MADE ON TAX YEAR 2005
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
SYM
SHARES
BDATE
SDATE
SPRICE
BPRICE
NET
MC
BSEQ
SSEQ
CLAIMED
TRUECOST

NEWBDATE

XYZ
380
11/03/04
01/15/05
6183.35
4269.49
1913.86
b
0001001
0001476
0.0
4269.49
n/a
XYZAC
600
11/04/04
01/15/05
976.32
693.49
282.83
b
0001378
0001499
0.0
693.49
n/a

*COMPANY=XYZ
SellTotal
SellClaimed
BuyTotal
BuyClaimed
(P/L) NET
EQUITY:
6183.35
0.00
4269.49
0.00

1913.86

NoneEQ:
976.32
0.00
693.49
0.00
282.83
SUBTOTAL:
7159.67
0.00
4962.98
0.00
2196.69
Outstanding Positions [ Short=0.00       ShortDeferred=0.00       Long=0.00       LongDeferred=0.00 ]

ZZZ
100
11/21/05
12/16/05
636.48
2681.74
-2045.26
b
0005606
0005629
0.0
2681.74
n/a
ZZZ
50
11/23/05
12/16/05
0.00
-1022.63
1022.63
w
0005690
0005629*
ZZZ
50
11/23/05
12/16/05
0.00
-1022.63
1022.63
w
0005690
0005629*
ZZZ
50
11/23/05
12/17/05
750.00
2167.02
-1417.02
bw
0005690
0006443
1022.63
1144.39
11/21/05
ZZZ
50
11/23/05
*LONG*
TBD
2167.02
0.00
Br
0005690
NO_S_SEQ
1022.63
1144.39
11/21/05

*COMPANY=ZZZ
SellTotal
SellClaimed
BuyTotal
BuyClaimed
(P/L) NET
EQUITY:
1386.48
0.00
1780.87
1022.63

-1417.02

NoneEQ:
0.00
0.00
0.00
0.00
0.00
SUBTOTAL:
1386.48
0.00
1780.87
1022.63
-1417.02
Outstanding Positions [ Short=0.00       ShortDeferred=0.00       Long=1144.39      LongDeferred=1022.63 ]

WASH Calculation Summary for TAX YEAR=2005
 

*OUTSTANDING*

SHORT_TOTAL

SHORT_DEFERRED

LONG_TOTAL
LONG_DEFERRED
 
 
Equity:
0.00
0.00
1144.39
1022.63
 
 
NoneEQ:
0.00
0.00
0.00
0.00
 
 
TOTAL:
0.00
0.00
1144.39
1022.63
 
             
 
*MATCHED*
SELL_TOTAL
SELL_CLAIMED
BUY_TOTAL
BUY_CLAIMED
(P/L) NET
 
Equity:
7659.83
0.00
6050.36
1022.63
496.84
 
NoneEQ:
976.32
0.00
693.49
0.00
282.83
 
TOTAL:
8546.15
0.00
6743.85
1022.63
779.67

The report shows matched transactions by individual company (underlying symbol) followed by the summary for that company. The overall summary is shown after individual companies. As illustrated in the example above, the matched transactions for the given tax year are shown in purple. The summary for individual companies for the given tax year is shown in cyan. The overall summary for the given tax year is shown in green.

Matched Transactions (see purple sections above)

Matched transactions are grouped together by individual companies (underlying symbol). Notice that different symbols will be grouped together if they have the same underlying symbol. In the example above, both XYZ and XYZAC matches are listed for company XYZ because XYZAC is an option for XYZ.

Each match on the report has 13 fields.

  • SYM - The security symbol; It can be an equity, SSF, option, commodity, currency, or future symbol.
  • SHARES - The number of shares matched. Notice that options/SSF are listed in shares. If there is a match of 6 contracts, it will be shown as 600 shares. The combination of SYM and SHARES has the same information as your Schedule D's column a.
  • BDATE - Date acquired (same as your Schedule D's column b).
  • SDATE - Date sold (same as your Schedule D's column c).
  • SPRICE - Sales price (same as your Schedule D's column d).
  • BPRICE - Cost and other basis (same as your Schedule D's column e).
  • NET - Gain or loss (same as your Schedule D's column f).
  • MC - Match Code. The match code describes characteristics for the given match.
    • b - short-term buy/sale match
    • B - long-term buy/sale match or unmatched open long position
    • s - short-term short/cover match
    • S - long-term short/cover match or unmatched open short position
    • w - wash sale entry
    • bw - short-term buy/sale match with deferred losses claimed
    • Bw - long-term buy/sale match with deferred losses claimed
    • sw - short-term short/cover match with deferred losses claimed
    • Sw - long-term short/cover match with deferred losses claimed
    • Br - unmatched open long position with unclaimed deferred losses
    • Sr - unmatched open short position with unclaimed deferred losses
  • BSEQ - Sequence ID number of the buy transaction. It helps you identify which buy transaction was used for a given match.
  • SSEQ - Sequence ID number of the sell transaction. It helps you identify which sell transaction was used for a given match.
  • CLAIMED - The amount of deferred loss was claimed by the given match. This field tells you how much deferred loss has been added to the cost basis (BPRICE).
  • TRUECOST - True cost is the original cost basis before claiming the deferred loss. You should realize that BPRICE = TRUECOST + CLAIMED.

Ordinary match entries on this report are almost identical to entries on your Schedule D report. The first 2 columns (SYM and SHARES) combined will be similar to column (a) on your Schedule D report. The third column will be similar if not identical to column (b). The fourth column will be similar if not identical to column (c). The fifth column will be similar if not identical to column (d). The sixth column will be similar if not identical as column (e). The seventh column will be similar if not identical to column (f).

An entry has the string "*LONG*" as the SDATE, it indicates the entry has no sell date. It means the transaction is a long position and is yet to be matched. This special entry will not be shown on your Schedule D.

An entry has the string "*SHORT*" as the BDATE, it indicates that the entry has no acquire date. It means the transaction is a short position and is yet to be matched. This special entry will not be shown on your Schedule D.

Company Summary (see cyan sections above)

The summary for each individual company is shown after each company's last matches. This company summary section has an inner table containing 3 rows and 5 columns. The 3 rows are Equity, NoneEQ, and Subtotal. The first row contains summary for Equity securities. The second row contains summary for Non-Equity securities (options/SSF). The third row adds up both all security types. Each row has 5 columns, namely SellTotal, SellClaimed, BuyTotal, BuyClaimed, and (P/L) Net. The explanation for the 5 columns is as follows:

  • SellTotal - Total sales.
  • SellClaimed - Total deferred losses claimed from short selling.
  • BuyTotal - Total cost basis.
  • BuyClaimed - Total deferred losses claimed from ordinary buy and sell activities.
  • (P/L) Net - Net profit/loss (total gain/loss).

Under the inner table, outstanding open positions are shown in one single line with the following fields:

  • Short - The total short value (at execution price; include commission and fee).
  • ShortDeferred - If not zero, there were wash sales triggered by the open short positions. The deferred losses are not yet claimed because the replacement short positions are still open.
  • Long - The total long stock value (at execution price; include commission and fee).
  • LongDeferred - If not zero, there were wash sales triggered by the open long positions. The deferred losses are not yet claimed because the replacement positions are still open.

Overall Summary (see above section in green)

The overall summary section adds up statistics for all companies. The section contains 2 tables. One table contains statistics for outstanding positions and another table contains statistics for all matched transactions.

The MATCHED table on this section has the identical layout as the one in the company summary section.

The OUTSTANDING table adds up the statistics for outstanding open positions of each individual company. The layout of this table is similar to the MATCHED table. Each row (Equity, Non-Equity, and the overall Total) has 4 columns as described below:

  • SHORT_TOTAL - The total short value (at execution price).
  • SHORT_DEFERRED - If not zero, there were wash sales triggered by the open short positions. The deferred losses are not yet claimed because the replacement short positions are still open.
  • LONG_TOTAL - The total long stock value (at execution price).
  • LONG_DEFERRED - If not zero, there were wash sales triggered by the open long positions. The deferred losses are not yet claimed because the replacement positions are still open.

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CSV Upload/Download and Transaction Import

 

Instead of entering transactions one by one on our web site, you can use Microsoft-Excel to prepare your transaction list, and save it as a CSV file, and upload it to our database. Alternately, you can import your broker's online transaction history by copy and paste them onto Offwall's database.

The transactions submitted should remain on our database as long as you do not change or delete them. However, they are subject to removal without notice - especially during our initial launch phase, where we expect frequent system modifications and upgrades. As such, we strongly recommend you to download and save your transactions to your computer's local disk. In the event that our database deletes or misplaces your transactions, you can simply upload the transactions back to our database.

To upload or download transactions in CSV format, please go to the Data Transfer page.

To import transactions by copy and pasting from your broker's online transaction history, please go to the Manage Data page.

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Mark-To-Market Calculation/Tracking


Mark-To-Market (MTM) accounting allows professional traders to change the tax status of their earnings from capital gains/losses to ordinary income/losses. MTM Accounting requires all open positions to be treated as they were closed by the last trading day and subsequently re-open on the first trading day in the following year. For example, if a trader bought 100 shares of IBM in 12/15/2006 and didn't sell them until 01/20/2007, the shares need to be treated as they were sold at the closing price on the last trading day of 2006 and bought again at the same price on the next trading day (first trading day of 2007).

If you are a professional trader and you have open positions need to be marked to market, you need to add MTM transactions to the database. For the IBM example above, you will need to create a 'MTM Long Position' transaction for 100 shares of IBM on 12/28/2006 with that day's closing price. Notice that you only need to create one 'MTM Long Position' transaction with the closing price on the last trading day for each open position - our calculator will determine the re-open price and date from the MTM transaction you entered.


There are 2 ways you can enter MTM transactions into the database. You can enter MTM transactions manually or use Offwall's Automated Mark-To-Market tool:

  • To enter the MTM transactions manually, you need to find out the number of outstanding shares for each position and then go to the Manage Trades page to create the MTM transaction manually. Please refer to the 'Outstanding Positions' report on the Reports page for outstanding shares and positions.
  • To enter the MTM transaction(s) using the automated tool, please go to the Automated Mark-To-Market page.

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Features in Development

 

Export Schedule D in TXF Format - You can export your Schedule D for tax softwares like TurboTax.

Corporate Actions Administration (CAA) - The CAA features will help you maintain your trading history in the event of corporate actions such as stock splits and symbol changes.

Direct OFX Import - You will be able to configure our database to import transactions directly and securely from your trading account.

Mark To Market (MTM) Automation - With a single click, our database will automatically create MTM entries to close out your open positions at the end of the year. Without this feature, you will have to find the open positions and manually enter MTM entries individually.

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