Set Up Accounting Bases to Allow Wash Sale Processing

You must set up the entity accounting basis to allow wash sale processing before you can process trades for those entities. For each accounting basis that is eligible for wash sale processing, set the Wash Sale Inhibit Indicator field (tag 775) to No. This field is available in the Create/Edit Entity panel, the Create Master Fund panel, the Edit Master Fund/Sector panel, and the Add a Basis to a Portfolio panel.

The system automatically calculates the wash sale disallowances and reversals for close transactions and automatically stores the wash sale adjustments. The system also checks several accounting basis fields to determine whether to calculate wash sales for taxable corporate actions that post to capital rather than income:

• If you set the accounting basis Paydown Gain Loss Account field (tag 4519) to Capital, then paydowns are eligible for wash sale processing.

• If you set the accounting basis Sinking Fund Gain/Loss Flag field (tag 9923) to post to capital, then sinking fund payments are eligible for wash sale processing.

• If you set the accounting basis Redemption Gain Loss Indicator field (tag 8916) to gain/loss, then calls, puts, and pre-refund corporate actions are eligible for wash sale processing.

The system calculates wash sale disallowances and reversals for corporate action transactions and adjusts taxable corporate actions to create the same wash sale effect as the system applies to buys and sells. In addition, the system adjusts non taxable corporate actions to move the original and remaining disallowed loss values, including the holding period, to the To side lots. In the case of partial corporate actions, it moves those values in proportion to the action.