Wash sale rule for long-term holding with short term trades

External question — Personal Finance Stack Exchange Author: user2961927 Original post: https://money.stackexchange.com/questions/165358 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. IRS Publication 550 : Wash sales. Your holding period for substantially identical stock or securities you acquire in a wash sale includes the period you held the old stock or securities. Now consider the following scenarios: (A) I bought 1 share of stock XYZ at $1000 two years ago. I sell it at $500 today, buy it back tomorrow at $300, and then sell it at $1200 at the end of the year. Overall, my trades results in -1000 + 500 - 300 + 1200 = $400 gain. Here is my analysis for (A): according to IRS, because my first sale is at a loss and the same stock is bought back within 30 days, the sale is a wash sale. Thus my holding periods will be added together. Over the long term, I cost $1000 at the beginning, and gained -1000 + 1200 = $200 in the end, so my long-term gain is $200. Consequently, my short-term gain is 400 - 200 = $200. (B) I bought 1 share of stock XYZ at $1000 two years ago. I sell it at $500 today (day 1), buy it back tomorrow (day 2) at $300, and sell it the next day (day 3) at $600, and then buy it back again the next day (day 4) at $500, and finally sell the stock at $1200 at the end of the year. Overall, my trades results in -1000 + 500 - 300 + 600 - 500 + 1200 = $500 gain. Here is my analysis for (B): Except for my year-end sale, all my sales are countered by a buy the next day, and they net a loss overall, thus the periods still add up. Over the long term, I cost $1000 at the beginning, and gained -1000 + 1200 = $200 in the end, so my long-term gain is $200. Consequently, my short-term gain is 500- 200 = $300. Are my analyses correct? Thanks in advance!

External answer — Personal Finance Stack Exchange Author: Barmar Original post: https://money.stackexchange.com/a/165361 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. As the quoted part of the publication says, when you repurchase the shares, the holding period (i.e. the effective purchase date) is reset to the holding period of the shares that were sold. So when you lose the ability to declare the capital loss, you get to keep the long-term holding period. So in both cases, your effective purchase date on all the sales is the date 2 years ago, and your net gains or losses will all be long-term. In addition, if you eventually dispose of all your shares in the same year as the wash sale(s), you can just net everything out and you don't have to transfer the cost bases between transactions. There will be some complications if you have purchases and sales within 30 days across the year-end.