cost basis report |Form 8949 Capital Gain & Wash Sales calculator software

I have a web service provider which does cost basis report with wash sale adjustment, why should I buy trademax?


I have a web service provider which does cost basis report with wash sale adjustment; so why should I buy trademax?

  1. Brokers only provide the online data, and charge an annual service fee from you; and if you don’t renew your license, on or before the very day it is due to expire, then your login ID and all your data will be invalid and unavailable. With TradeMax, you will never be in such dilemma as you can always view and process the data in current year or prior years, even if you choose to stop using our software. As long as your TradeMax is still installed in your computer, you are able to access and process these data. It’s your data, this will never change.
  2. Web service providers only handle your data in current year,even some only provide the data of the last three months. But if you buy TradeMax, it handles data for current year and prior years. You also can easily generate cost basis report based on the data of multiple years with one-time license fee.

My broker provides cost basis report with wash sale adjustment, why do I still need to buy Trademax?


My broker provides cost basis report with wash sale adjustment, why do I still need to buy Trademax?

Someone asked me why investor could not use broker’s gain and loss report. Many brokers provide Gain and Loss report without considering the factor of WASH SALE RULES. Others claimed their Gain and Loss report compliant with WASH SALE RULES. Can you trust them? Never!

“I only had 5 trade a year, broker could not be wrong, so can I trust broker?” Never!

Here is a simple case with 2 trades involved. You placed a Limited Price Order with a broker, e.g. Scottrade. And you wanted to buy 1000 shares of XYZ at price of $10. I did not choose the option AON(all or none). Because it is a Limited Price Order, this order was not executed at once. At the day end, you got confirmation that my order was fulfilled by 2 transactions, a 500 shares buy at $10 and another 500 shares buy at $10. 1 week later, you sold 500 shares at $9 with a net loss of $500. Now, you have 3 transactions listed on year end statement. a 500 shares Open Long, a 500 shares Open Long and a 500 shares Close Long. Any broker who claims they have WASH SALE RULES built in their Gain and Loss reports, will report that you have $0 capital loss. It is WASH SALE RULES that your $500 loss is disallowed because you have bought 2nd 500 shares as replacement shares. However, this is a wrong result! Your real intention is to buy 1000 shares, the 2nd 500 shares is never an intention of replacing 1st 500 shares for continually holding. In real world, no broker will fix this kind of error for you. Their statement always list multiple transactions when a Limited Price Order executed in several transactions.

You can use software like TradeMax to alter transaction record downloaded from broker and use TradeMax Merge Transaction function in TradeMax to merge transactions when above mentioned scenario applied. In that case, you will have a 1000 share buy and a 500 shares sell in trades database. Software will generate a Form 8949 with $500 loss.

According to the definition of Wash Sale in IRS publication 550:

A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days

before or after the sale you:

1. Buy substantially identical stock or securities.

2. Acquire substantially identical stock or securities in a fully taxable trade.

3. Acquire a contract or option to buy substantially identical stock or securities.

The full publication can be found by contacting your local IRS office or visiting the IRS Web site at www.irs.gov

In 2008, the IRS issued Revenue Ruling 2008-5.In this ruling, IRS said, If an individual sells stock or securities for a loss and causes his or her individual retirement account or Roth IRA to purchase substantially identical stock or securities within 30 days before or after the sale, the loss on the sale of the stock or securities is disallowed.

When you calculate cost basis with wash sale adjustment, you need to combine all investments accounts owned or controlled by you, including your spouse’s account or any corporate account you control.

The wash sales rule also applies to short trade.

We rephrase Wash Sale Rule in a easy understandable sentence. “A Wash Sale occurs if you close an open position (An open position could be a long position or a short sale) of stock or securities at a loss and within 30 days, before or after the sale, you acquire an open position of substantially identical stock or security as a replacement in any associated account.”

In certain circumstance, substantially identical stock or security could include but not limited to

  1. Same stock listed in different stock exchange
  2. Same stock with certain type of preferred shares
  3. Trades between stock and option with same underlying
  4. Trades between stock and future/warrants with same underlying
  5. Trades between certain type of call options and put options at different strike price etc.
  6. Trades between securities with same security type but different orientation(Long and Short should be treated differently)
  7. Trades between certain securities issued by the same company

TradeMax allows users to make their own definition of substantially identical stock or security to suit various customer needs.

The wash sale rule aims to prevent an investor from obtaining the benefit of a tax loss without materially reducing economic exposure to the investment, so that investors cannot deduct losses from sales or trades of stock or securities when wash sale rules apply.

If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). The result is your basis in the new stock or securities. This adjustment postpones the loss deduction until the disposition of the new stock or securities. Your holding period for the new stock or securities begins on the same day as the holding period of the stock or securities sold.

The above description above refers to http://www.irs.gov/publications/p550/ch04.html#en_US_publink100010601

Now, many brokers have provided detailed cost basis report with calculated wash sales, but have confined themselves to reporting the wash sales within the same account and for the same CUSIP; in such cases, taxpayers are responsible for reporting wash sales for identical as well as substantially identical securities, across all owned taxable accounts. As for different and complicated wash sale scenarios, the cost basis report and wash sale calculated is far from accurate and completeness.

Definition of substantially identical securities TradeMax Broker Cost Basis Report Other Tax Software
Securities with same CUSIP Supported Supported Supported
Same stock listed in different stock exchange Supported Not Supported N/A
Same stock with different preferred shares Supported Not Supported N/A
Trades between stock and option( if the underlying stock is the same) Supported Not Supported Limited function
Trades between stock and stock future ( if the underlying stock is the same) Supported Not Supported Limited function
Trades across different accounts and joint accounts Supported Not Supported N/A
Trades between call option and put option at different strike price etc. Supported Not Supported Limited function
Trades between securities with same security type but different orientation Supported Not Supported N/A
Trades between securities issued by the same company Supported Not Supported N/A

TradeMax can not only auto-identify different complicated wash sale scenarios, but also can calculate wash sales across different accounts very accurately. With TradeMax, the users can maximize profits and figure out the disallowed losses and deductable losses by TradeMax which strictly coincides with the Wash Sale Rule of IRS. Inaccurate report means intangible losses in time and money which can be saved by using TradeMax’.

Run Reports


Run Reports

TradeMax offers a simple and clean solution to run report for your tax and analyzing your trading performance purpose.

Before you run a report, you need do the following step:

 

Enter Your SSN and Name

  1. Click the Main Button on the upper left corner of the Trade window and press the Options Button

  2. Options dialog box will pop up:

  3. Enter your name and SSN and your name will appear on your upper left section in the running report
  4. You can click the checkboxes to:
    • Make the Exercised/ Assigned securities’ Buy/Sell price same as the strike price of option.
    • Auto-Expire unexercised/ unassigned options at 0 price on expiration date
    • Auto scan the trade errors.
    • Update your TradeMax software when running TradeMax each time.

     

  5. If you want to upback TradeMax data, click to view the directory of the database.
  6. You can also change the SSN by redoing the above step 1 & step 2

 

The following will show you how to Add a Report to Account List

Many investors trade security in other currencies such as EUR, CAD, AUD, JPY, HKD, GBP, CHF, TradeMax now supports running report in your base currency and in USD currency for tax purpose.

The Base Currency is the first currency quoted in a currency pair.  The base currency is referred to as the parent currency and exchange rates are quoted in per unit of the base currency.  The base currency is the more valuable currency.  Therefore in the HKD/USD currency pair, the HKD is more valuable than the dollar, so it is the base currency.  The base currency is also known as the accounting currency or domestic currency. TradeMax supports running reports on the following base currencies such as EUR, CAD, AUD, JPY, HKD, GBP, CHF.

The Tax Currency is the default currency USD.

TradeMax provides two options to generate the report:

Option 1 : Click the Report Button in Trade Panel.

Option 2 : Select the specific report from the right menu of Trade Data.

 

Option 1 : In order to simplify the process of generating reports, you can click the Report Button (shortcut button) in Trade Panel. the following will tell you how to generate the report by clicking the shortcut button.

  1. Click the Report Button in Trade Panel.
  2. The Report Wizard dialog box pops up:
    • Select the specific account that you want to generate the reports from dropdown list.
    • Select the specific Finance Year that you want to generate the reports from dropdown list
    • Select the specific report you want to run from the dropdown list. After you select the specifc report, the specific report icon will be auto-generated under Trade Data diretory.
    • Select the currency type from the dropdown list.
    • Note: Please use End of Tax Year function to generate baseline position or Enter Your Year End Baseline Position before generating the reports, otherwise the results will be inaccurate!

Option 2 : You also can generate your reports by clicking the specific report icon under Trade Data direcoty after you select it from the right menu of the Trade Data

  1. Right-click the Trade Data view in the Account List and select the specific report.
  2. As you see, there are a dozen reports:.

    1. Cost Basis Transaction Report -This report is for those users who track the cost basis in stocks, bonds and mutual funds to report a cost basis when an investment is sold.
  3. Daily Account Value – This report provide you with a simple way to track your trade data on daily basis, with the Daily Account Value function, you can easily compare and monitor your trade performance through the generated chart so as to make a better investment strategy and maximize your capital gains.
  4. Daily Market Value Report – This report is for those users who track the performance and market value of the securities on daily basis in specific finance year. The report will show the portfolio of every transaction on daily basis.
  5. IRS Schedule D-1 – This report is for those users who require a more exact replica of the IRS form.
  6. Mark to Market
    Detail Report
    – This report is for those users  want to record the price or value of a security, portfolio on a daily basis to calculate gains and losses or to confirm that margin requirement are met.
  7. Mark to Market For Form 4797 – This report is for traders in stocks, options and single-stock futures who elect mark-to-market accounting to report their trading activity on Form 4797
  8. Mark to Market Gain/Loss Pie Report – This report is for those users who want to calculate mark to market trading performance for each securities and track the mark to market gains and losses for a fiscal year or date range.
  9. Realized Gain/Loss Pie Report – This report is for those users who want to calculate trading performance for each securities and track the realized gains and losses for a fiscal year or date range.
  10. Realized Gain/Loss Report – This report is for those users who require trade transaction detail. Such as Security, Quality, open price, Open date, Open Commission, close price, close commission, sales price, cost basic, Actual gain &lose for each transaction. Moreover, it can be grouped by ID, Symbol, or TradeDate.
  11. G& L Report – This is the default report created by TradeMax for filing with Taxes.
  12. SummaryReport – Display or print a trade summary report. This valuable summary or aggregation of an entire ID or Symbol allows a user to see how one Symbol performed versus another
  13. Transaction Detail Report – A report display all trade detail. This report lists each and every transaction as displayed in the grid. Additionally, the profit or loss can be summed by Trade Number, Ticker, or Date.
  14. Unrealized Gain/Loss Report – This report is for those users who  want to get the information of Gain/Loss when the price of the securities decrease or increase after buying, but he or she has yet to sell it.
  15. Wash Sale Detail Report – This report allows you to analyze your disallowed wash sale losses that have been deferred to next year
  16. Section 1256 Report – This report is for those users who want to get the information of Unrealized Gain/Loss amount and 60% long term amount and 40% short term amount auto-calculated by TradeMax as an attachment to Section 1256 contract.
  • You will see the selected report under the Trade Data view like this:
  • If you run the report in Base Currency, on the left side of your selected report title will dispaly your base currency. As the pricture showed above, HKD appears on the left side of IRS Schedule D report . If you run the report in Tax Currency (the default currency is USD), as you can see from the aboved picture, USD appears on the left side of the report title.

    Notes:

    Unregister edition will pop a register remind dialog box when you run the report:

    • You can register your TradeMax by entering the Registration Name and Registration Code and press the Register button
    • You can also click Buy Now to buy the Registration Code
    • A free trial version can only generate report from a data range 1/1 to 6/30 and can’t export to pdf and excel.

     

     

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