Bucky wrote:
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Thank you for your suggestion. Indeed, I am thinking of selling the
newly acquired ESPP shares soon. Once I do that, how will this be
handled on the schedule D next year? Would it be handled as if wash
sale never occurred, or would there is some other fancy accounting
required?

The ESPP shares that were sold are as follows (sale date: 4/20/2006)

Purchase Date Shares Sell Price Cost Cap Gain Ord. Income
10/31/2000 90 450.77 3,519.00 (3,065.40) -
4/30/2001 271 1,357.33 3,943.05 (2,577.21) -
10/31/2001 457 2,288.93 3,943.91 (1,640.63) -
4/30/2002 498 2,494.28 3,461.10 (951.18) -
10/31/2002 630 3,155.41 1,587.60 1,587.60 -
4/30/2004 1,190 5,960.23 3,944.85 2,052.75 -
4/29/2005 1,046 5,238.99 3,218.54 1,485.32 567.98

Total 4,182 20,945.94 23,618.05 (3,108.75)
567.98

On 4/28/06, 1363 shares were purchased at a price of $3.2725 (85% of
$3.85). If I were so sell all the shares acquired on 4/28/06, say,
today, I would have
1363 shares sold 5/15 [at] 4.75 ==> short term cap loss = 386.91 and
ordinary income = 2,354.58. So, how would it all be handled as far as
taxes are concerned?

This is my first time selling ESPP (and only 3rd or 4th time selling
any shares), so I would greatly appreciate detailed directions.

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I read all 10 pages at that link, but there is nothing in there about
ESPP & wash sale.

- quote -

You are SO RIGHT! We held on to the ESPP stocks becuase of (a)
misplaced loyalty to the company; and (b) inertia. If we had simply
sold shares all along right after the purchase date, we actually would
have made more than 30% over the years!

Bhoot Nath

Bucky wrote:
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Actually, all of the $3,000 loss is not disallowed. If she replaced 10%
of the stock, then 10% of the loss would be disallowed and 90% could be
claimed. I agree that selling the new shares within the year is a good
idea unless she has a good reason to hold them longer.

Dave

deja_bhoot2000[at]yahoo.com wrote:
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I think you can just sell the newly acquired stock by the end of year.
It won't change the fact that it's a wash sale, but it will allow you
to add the disallowed $3000 loss to the cost basis of the new shares.

You can read this for more info:
http://www.fairmark.com/capgain/wash/

BTW, I recommend selling ESPP shares immediately. It's not worth trying
to maximize the long-term tax benefits (as I assume you've experienced
first-hand since you had a $3000 loss after holding onto ESPP shares
from 5 years ago). Just take the 17.6% gain and run!

deja_bhoot2000[at]yahoo.com writes:

[This really is something that should go in misc.taxes.moderated, since
it's not really about financial planning.]

- quote -

[snip]

- quote -

Yes, it does. It was a purchase within 30 days to either side of
a loss sale. So the wash sale rules apply. The loss on the "replaced"
shares gets disallowed and is added to the basis of the "replacement"
shares. There's no magic rule granting special treatment to ESPP stock.

- quote -

If you want to avoid a wash sale, then be sure to make the loss sale
at a time such that any purchase is more than 30 days away from
the sale.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

My wife has participated in her employer's Employee Stock Purchase Plan
(ESPP). The company is a publically traded company, and the discount
offered is 15%.

Recently, she sold some of the stocks from her ESPP holdings. The
acquisition date of these holdings varied from 5 years ago to 6 months
ago. Overall, there was a small amount of los (3K), and about $1500 of
compensation income (bargain element on the disqualifying disposition
portion). We do not hold this stock in any other investment vehicle.

She continues to participate in the ESPP, and early next week, she will
get some more stocks in the plan (using the contributions from the
previous six months). This purchase would be only about 15 days after
the sale date.

So, does this make our previous sale a wash sale? If so, how do I
handle it? Does this mean that ESPP sales (at a loss) can only be done
in the middle 4 months of the 6 month period? (since there is a
purchase once every 6 months).

Bhoot