50.1K

Verified Solution

Link Copied!

Eddie slick Haskell needs your tax advice regarding a recent stock transaction that didnt turn out the way he planned. On January 20, 2021, Slick purchased 100 shares of Tesla stock (ticker TSLA) for $290.52 per share. By mid-May of the same year, the stock had fallen to nearly $200 per share which represents an unrealized loss of over $9,000. Slick still believes in TSLA stock and wants to hold it long-term, but he really wanted to capture that $9,000 loss as a tax deduction on his tax return. Being a seasoned investor, Slick was aware of the wash sale rule that would disallow the loss if he purchased the same stock within 30 days before or after the date he sold it, so he came up with a slick plan. He sold the 100 shares of TSLA stock that was held in his taxable brokerage account for $201.20 and immediately purchased 100 shares in his traditional IRA account at the same price. Slick thought he had beaten the system until he received his account statement which listed the $8,932 loss as a disallowed wash sale loss. Can Eddie deduct the loss on his 2021 tax return, or is the broker correct in reporting it as a wash sale? If the broker is correct, Eddie would like to know what his cost basis of the Tesla stock in his IRA account is. Is that $8,902 loss permanently forfeited? What would be his cost basis if he were to re-purchase 100 shares of Tesla stock in his taxable brokerage account? Write a research memo for your permanent record and a client letter like the ones shown in the example. The memo should be no longer than 2 typed single-spaced pages and could easily be shorter. The client letter should be no longer than 1 page. The Tax Research assignment is due at 11:59 pm on December 1, 2023.

Answer & Explanation Solved by verified expert

See Answer