Expert: Paul Henneman - 10/15/2005

Question
Hello,
I am new in the investment business and I discovered the wash sale concept that I am trying to undestand. I bought shares ($35/share), sold them ($31/share), got a lost, and bought them back at $33.88 (within 30 days), and now I got in my account $36.91/share. I am not sure how my broker came up with that number. Could you clarify the matter?

Thanks

Answer
Thank you for your question! Here is a good definition of a wash sale:
"purchase and sale of a security either simultaneously or within a short period of time. Wash sales taking place within 30 days of the underlying purchase do not qualify as tax losses under the Internal Revenue Service rules."
I got this definition from Barron's Dictionary of Finance and Investment terms. So essentially you purchased and sold some shares quickly.
There is always some 'slippage' in the stock price when you make a buy or a sell. When you decide to make the transaction, the broker will try to execute it as close what you want as possible. But as many people are buying and selling at once, he must take a price that is as close as he can get. If the stock moves quickly up or down, at times this price can be a bit different than what you were expecting. Most likely the price you have in your account not being what you expected is due to this slippage.
But sometimes the order was not excecuted quickly or other problems arose. I would check with your broker.
I hope this helps! Please do not hesitate to follow up with me if I can be of any further service,

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com
www.VEInstitutional.com
www.VEReports.com