4 week rule and loss offsetting

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Moolahasker

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Hello,

I made the following trades in companies shares this year:


CompanyActionDateNum sharesEUR Value
CompABuyMay 9th1001500
CompBBuyMay 14th 1001600
CompCBuyJune 4th10500
CompCSellJune 4th10430
CompDBuyJun 28th1002300
CompDSellJuly 8th1002700
CompBSell July 11th1001700
CompABuyJul 24th35350
CompASellAug 5th35280
CompASellAug 5th100800

The number of shares illustrates that entire lots of shares were sold, so each sale is either fully lifo or fully fifo.

I'm a bit confused about whether I can use losses sold within 4 weeks of purchase to offset other gains.

IF I just subtract Buy cost from Sell cost, it looks like I made a loss of 340 eur. Do I have to make special account for shares sold within 4 weeks of purchase?

I made a loss on CompA shares sold on Aug 5th which were bought Jul 24th. If I sell shares in different CompE tomorrow at a gain, can I offset the loss from the 35 shares sold on Aug 5th, due to them being the same class of shares?

Also - the name bed and breakfast sort of implies you would Sell shares (with a gain) one evening and rebuy them the next day, in order to re-base the capital gain. Does the disposal and repurchase have to be on different days, or can I sell and buy on the same date?

Thanks!
 
There are two relevant rules in the Revenue guidance.

1) Shares sold within four weeks of acquisition are treated as LIFO not FIFO (Section 3.1):

2) Losses on shares sold within four weeks of acquisition cannot be offset against gains on other companies (Example 2):

Selling or disposing of shares

This page is an explanation of the special rules that apply to CGT on shares
www.revenue.ie www.revenue.ie
 
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CompanyActionDateNum sharesEUR ValueWithin 4 weeksGain/lossOffset loss
CompABuyJul 24th
35​
350​
CompASellAug 5th
35​
280​
Yes - LIFO
-70​
No
CompABuyMay 9th
100​
1500​
CompASellAug 5th
100​
800​
No - FIFO
-700​
Yes
CompBBuyMay 14th
100​
1600​
CompBSellJuly 11th
100​
1700​
No - FIFO
100​
CompCBuyJune 4th
10​
500​
CompCSellJune 4th
10​
430​
Yes - LIFO
-70​
No
CompDBuyJun 28th
100​
2300​
CompDSellJuly 8th
100​
2700​
Yes - LIFO
400​

Total = 0 - 700 + 100 + 0 + 400 = - 200

Therefore you can only offset a loss of 200 against CompE, not 340.

If you buy more shares in CompA within four weeks of Aug 5th, then you can offset its loss of 70 if you eventually sell those new shares in CompA with a gain.

Since four weeks have already passed since you sold CompC, its loss of 70 is not offsetable at all.
 
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Moolahasker said:
Also - the name bed and breakfast sort of implies you would Sell shares (with a gain) one evening and rebuy them the next day, in order to re-base the capital gain. Does the disposal and repurchase have to be on different days, or can I sell and buy on the same date?
Click to expand...
If you sell shares with a gain it doesn't matter when you rebuy them as gains are always realised. That includes rebuying on the same day.
 
Hi, I'm sorry but @Corola example is not correct.

That's because the website example being referred to is not correct. Jane can user her losses.

Simply put, if i buy Stock A for 100 today and sell same Stock A for 40 tomorrow, making a loss of 60, i can use that loss against any other stock I want (so long as I do not re-acquire Stock A again within 4 weeks after last sale).

Be aware that Revenue are not liable for mistakes on their website, because they can simply defend themselves by saying that you could have gotten correct information elsewhere - and indeed you can. If you refer to Revenue Tax and Duty manuals, TCA 1997, Tax books, chartered accounts etc, they will all confirm that website example is incorrect for Jane.

I've been on the phone with Revenue, telling them to fix their incorrect website example, but they're being annoyingly slow about it...
 
The TDM says this, which doesn't match the Revenue website.

6A.3.1 Disposal of shares within four weeks of acquisition
The FIFO rules are modified in any case where shares of the same class are bought and sold within a period of four weeks. Where shares are sold within four weeks of acquisition the shares sold are identified with the shares acquired within that period.
Furthermore, where a loss accrues on the disposal of shares and shares of the same class are acquired within a four week period, the loss is not available for offset against any other gains arising and instead is only available for set off against any gain that might arise on the subsequent disposal of the shares so acquired in the four week period - this provision does not apply where there is a gain on the disposal.
Click to expand...

Although the TDM also says This manual is currently subject to review and may not reflect up-to-date position. So hopefully one or both of them are being updated to give the same information.
 
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Thanks Corola.

The wording on that manual is indeed a little muddy at best.

Furthermore, where a loss accrues on the disposal of shares and shares of the same class are acquired within a four week period, the loss is not available for offset against any other gains arising and instead is only available for set off against any gain that might arise on the subsequent disposal of the shares so acquired in the four week period - this provision does not apply where there is a gain on the disposal.
Click to expand...
The point of confusion here is in the poor use of word "acquired", because it does not make it clear if it means acquired within 4 weeks before sale, or within 4 weeks after sale (or both).

This is clear in the following TDM:
In the event of a sale of shares followed by a re-acquisition within four weeks a loss on the sale will be allowed only against gains derived from the disposal of the shares re-acquired within four weeks. Where the reacquisition involves a fraction only of the shares sold the restriction will be confined to a corresponding fraction of the loss.
Click to expand...
The word "re-acquired" here is what makes all the difference. Means this only ring-fences losses for those shares that are bought within 4 weeks after sale (for a loss) only.

From TCA 1997 (the real final source of truth):
(3) Where a loss accrues to a person on the disposal of shares and such person reacquires shares of the same class within 4 weeks after the disposal, that loss shall not be allowable under section 538 or 546 otherwise than by deduction from a chargeable gain accruing to such person on the disposal of the shares reacquired; but, if the quantity of shares so reacquired is less than the quantity so disposed of, such proportion of the loss shall be allowable under section 538 or 546 as bears the same proportion to the loss on the disposal as the quantity not reacquired bears to the quantity disposed of.
Click to expand...
Again, the all import word is "reacquired". Ring-fencing of losses only applies to shares that are re-acquired.

So:

Case 1) Buy Stock ABC on day 1, sell Stock ABC on day 2 for a loss. Loss usable any way you want against any other asset.
Case 2) Buy Stock ABC on day 1, sell Stock ABC on day 2 for a loss, buy back Stock ABC on day 3 -> Loss ring fenced to Stock ABC only.
 
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