Form 1099-B Wash Sale Disallowance (Box 1g)
The Formal Definition
The mandatory reporting box on US IRS Form 1099-B where brokerages officially record realized capital losses that are legally disallowed for immediate tax deduction because the investor repurchased a substantially identical security within the statutory 30-day window.
Disallowed Loss = Realized Loss on Sale (Within ±30 Days of Repurchase) → Added to Cost Basis of Replacement Security (Reported in Box 1g)
Cole Barrett's Reality Check
The Unvarnished Bottom Line"Box 1g on your 1099-B is where day-trading tax illusions go to die. You might think you had a break-even year because you made $100,000 and lost $100,000. But if you traded the same stock continuously, your broker marks those losses in Box 1g as wash sales. The IRS disallows the losses, taxes you on the full $100,000 in gains, and leaves you with a massive tax bill on zero real profits."
Interactive Simulator: Test the Math
Real-World Example: Scenario Breakdown
Examining the real numbers for: Active day-trading account generating $150,000 in gross gains and $145,000 in wash-sale losses on a single volatile tech stock
| Execution Metric | Section 475(f) Mark-to-Market Trader | Unaware Retail Day Trader (Box 1g Disaster) |
|---|---|---|
| Fee / Rate | $0.00 | $0.00 |
| Spread / Buffer | Elected Trader Tax Status (TTS) with IRS Section 475(f) mark-to-market election | Traded the same stock daily through December without flattening for 31 days |
| Execution / Status | Completely exempt from IRS wash sale rules | Broker reported $145,000 in Box 1g Disallowed Losses |
| Total Cost / Result | Zero Box 1g wash sale disallowance friction | Owed $45,000 in taxes on an account that only made $5,000 in real profit |
How Brokers Weaponize This Term
Trading platforms promote zero-commission scalping without displaying real-time year-to-date Box 1g wash sale disallowance trackers, leaving active traders to receive surprise six-figure tax liabilities in February.
Broker Evaluation Matrix
Cole Approves
Charles Schwab / Interactive Brokers: Provides real-time, downloadable realized gain/loss tax dashboards with automatic Box 1g wash-sale tracking throughout the calendar year.
Read Audit →Cole Flags / Avoids
Simplified Mobile Apps: Hides cumulative wash-sale calculations until the official 1099-B is generated at the end of the tax year.
View Trap Details →Frequently Asked Questions
How can a retail day trader avoid December wash sale traps?
Completely close out all positions in the traded security before December 31st and do not purchase it again until at least 31 continuous days have passed in January.
Does a wash sale permanently destroy the tax loss?
No. The disallowed loss is added to the cost basis of the newly purchased shares, deferring the loss deduction until those replacement shares are finally sold cleanly.