Page 225 - Individual Forms & Instructions Guide

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change of the stock is a long-term capi- vested in a QOF in the Form 8949 in- 1. Buy substantially identical stock
tal loss to the extent of the extraordinary structions. or securities,
dividends. An extraordinary dividend is Market Discount Bonds 2. Acquire substantially identical
a dividend that equals or exceeds 10% stock or securities in a fully taxable
(5% in the case of preferred stock) of In general, a capital gain from the dispo- trade,
your basis in the stock. sition of a market discount bond is trea- 3. Enter into a contract or option to
• Amounts received by shareholders ted as interest income to the extent of
in corporate liquidations. See Pub. 550. accrued market discount as of the date acquire substantially identical stock or
securities, or
• Cash received in lieu of fractional of disposition. See sections 1276
shares of stock as a result of a stock split through 1278 and Pub. 550 for more in- 4. Acquire substantially identical
or stock dividend. See Pub. 550. formation on market discount. See the stock or securities for your individual re-
• Load charges to acquire stock in a Instructions for Form 8949 for detailed tirement arrangement (IRA) or Roth
regulated investment company (includ- information about how to report the dis- IRA.
ing a mutual fund), which may not be position of a market discount bond. You can't deduct losses from wash
taken into account in determining gain Contingent Payment Debt sales unless the loss was incurred in the
or loss on certain dispositions of the ordinary course of your business as a
stock if reinvestment rights were exer- Instruments dealer in stock or securities. The basis of
cised. See Pub. 550. Any gain recognized on the sale, ex- the substantially identical property (or
• The sale or exchange of S corpora- change, or retirement of a taxable con- contract or option to acquire such prop-
tion stock or an interest in a partnership tingent payment debt instrument subject erty) is its cost increased by the disal-
or trust held for more than 1 year, which to the noncontingent bond method is lowed loss (except in the case of (4) ear-
may result in collectibles gain (28% rate treated as interest income rather than as lier).
gain). See the instructions for line 18. capital gain, even if you hold the debt
• Gain or loss on the disposition of instrument as a capital asset. If you sell These wash sale rules don't apply to a
securities futures contracts. See Pub. a taxable contingent payment debt in- redemption of shares in a floating-NAV
550. strument subject to the noncontingent (net asset value) money market fund.
• Gain on the constructive sale of bond method at a loss, your loss is an or- If you received a Form 1099-B (or
certain appreciated financial positions. dinary loss to the extent of your prior substitute statement), box 1g of that
See Pub. 550. original issue discount (OID) inclusions form will generally show whether there
• Certain constructive ownership on the debt instrument. If the debt in- was any nondeductible wash sale loss
transactions. Gain in excess of the gain strument is a capital asset, treat any loss and its amount if:
you would have recognized if you had that is more than your prior OID inclu- • The stock or securities sold were
held a financial asset directly during the sions as a capital loss. See Regulations covered securities (defined in the in-
term of a derivative contract must be section 1.1275-4(b) for exceptions to structions for Form 8949, column (e)),
treated as ordinary income. See section these rules. and
1260. If any portion of the constructive • The substantially identical stock or
ownership transaction was open in any If you received a Form 1099-B (or securities you bought had the same CU-
prior year, you may have to pay interest. substitute statement) reporting the sale SIP number as the stock or securities
See section 1260(b) for details, includ- of a taxable contingent payment debt in- you sold and were bought in the same
ing how to figure the interest. Include strument subject to the noncontingent account as the stock or securities you
the interest as an additional tax on bond method and the Ordinary box in sold. (CUSIP numbers are security iden-
Schedule 2 (Form 1040), line 8. Check box 2 is checked, an adjustment may be tification numbers.)
box c and in the space next to that box, required. Report the transaction on Form However, you can't deduct a loss from a
enter “Section 1260(b) interest” and the 8949 and complete the form’s Work- wash sale even if it isn't reported on
amount of the interest. This interest isn't sheet for Contingent Payment Debt In- Form 1099-B (or substitute statement).
deductible. strument Adjustment in Column (g) to For more details on wash sales, see Pub.
• Gain or loss from the disposition figure the adjustment to enter in column 550.
of stock or other securities in an invest- (g) of Form 8949. Report a wash sale transaction in Part
ment club. See Pub. 550. See Pub. 550 or Pub. 1212 for more I or Part II (depending on how long you
• Certain virtual currencies, such as details on any special rules or adjust- owned the stock or securities) of Form
Bitcoin. See the Instructions for Form ments that might apply. 8949 with the appropriate box checked.
1040 and IRS.gov/ Complete all columns. Enter “W” in col-
VirtualCurrencyFAQs. Wash Sales umn (f). Enter as a positive number in
• If you are deferring eligible gain A wash sale occurs when you sell or column (g) the amount of the loss not al-
by investing in a QOF, report the gain otherwise dispose of stock or securities lowed. See the instructions for Form
on the form on which you normally re- (including a contract or option to acquire 8949, columns (f), (g), and (h).
port the gain and report the deferral on or sell stock or securities) at a loss and,
Form 8949. See How To Report an Elec- within 30 days before or after the sale or Traders in Securities
tion to Defer Tax on Eligible Gain In- disposition, you: You are a trader in securities if you are
engaged in the business of buying and

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