FAQ: A Wash Sale Solution for Quicken

Unknown
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edited December 2018 in FAQ'S (Windows)

​It is possible to modify Quicken entries to recognize wash sales. I am not an accountant but the results compare to my 1099B's. The directions below appear long but it is always more of a problem to explain a procedure than to do it.

The IRS makes one take a delayed loss if a purchase is made 30 days before or after a sale which results in a loss. See the IRS definition and examples here or at http://www.irs.gov/publications/p550/ch04.html#en_US_2014_publink100010601
***** NOTE **** (this was added 03/18/15)
I use Average Cost and had only one Wash Sale per asset with purchases made before and after the sale.

If you use FIFO instead of average cost then AFTER the first wash sale adjustment you may have to replace subsequent sales (see Make Adjustments #1) and then restart from the beginning with a new CapGain report to recalculate the remaining adjustments. This is because part of wash adjustments is changing purchases dates to an earlier time and increasing costs which, if that lot is then sold, will increase the loss on the following sale.

If you use LIFO instead of average cost then I am not confident that my method will work.
***** END *****

Calculate the necessary wash adjustments:
1. Make normal, non-wash adjusted, entries in Quicken.
2. Double check that the entries are correct.
3. Generate a Q. Capital Gains Report.
4. Export the CapGains report in Excel format (txt).
5. Import the report into Excel and save the spreadsheet in its native format (xls, slsx) or use any calculation program or print a copy of the report for manual calculations.
6. Identify any asset sales with CapGain LOSS (Q.Loss)
7. Identify any purchases of the same asset +/- 30 days and add the info to the spreadsheet. Note: IRS definition is an asset purchase substantially the same so you may have to also include purchases of a different asset.
8. The ALLOWED loss (A.Loss) on a sale is Q.Loss x [1-(shares bought)/(shares sold)]
If you sold 850.231 shares at a loss of $975.83 and bought back a TOTAL of 769 shares then the A.Loss = 975.83*[1-(769/850.231)] = $93.23 (A.Loss cannot be negative, zero is lowest value.)
9. The TOTAL cost adjustment of purchased sales C.Adj = Q.Loss-A.Loss
a. C.Adj is applied to each wash purchase based on the number of shares.
b. If one purchase then its cost increase = 975.83-93.23 = $882.60.
c. If multiple purchases each is adjusted on a per share bases = 882.6/769 = $1.148 per share bought.
Before making any changes in Quicken I recommend making a safety copy of your data file.

Now enter the necessary wash adjustments:
Q changes are made in the brokerage account where the asset transactions took place.
To help later ID related wash adjustments enter, into each adjustment following, a memo like "Wash mm/dd" where mm/dd is the month/day of the Wash Sale.
1. Delete ALL SALES from the earliest wash sale to the last date in the file.
NOTE: Your sales details are in the original Q.CapGain report
2. For all wash PURCHASES before a specific wash sale date:
a. Enter a Remove Shares transaction for the same number of shares as the purchase. Check that the original purchase cost was removed.
b. Enter an Add Shares Transaction for the original purchase with a cost = old cost + adjustment and a purchase date the SAME as the purchase date on the Wash Sale.
c. Repeat a and b for each purchase BEFORE the wash sale.
3. Adjust the wash sale
a. Enter a Remove Shares Transaction for the same number of shares as the sale. Check that the original sales cost was removed.
b. Enter an Add Shares Transaction for the original sale with cost = original cost + A.Loss and a purchase date the SAME as the purchase date of the Wash Sale.
c. Enter a Sale Transaction with same date, shares, and Received $ as the original sale.
4. Check that this sale by making a new temporary Q. CapGains Report.
The adjusted sale should now have a Loss = A.Loss
5. For wash PURCHASES after the wash sale date repeat 2 above.
6. Enter all Non-Wash sales before the next wash sale.
7. Repeat 2 - 6 for ALL Wash Sales

Check the result:
1. Generate a Q. CapGains Report.
2. Compare this report to the original CapGains report
a. Overall Totals for Gross, Cost, and Realized should be the same.

b. If there are differences:
1. Check that you entered the adjusted values correctly
2. If correct check your adjustment calculations.
This discussion has been closed.

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