I am having trouble understanding the basis adjustment on the wash sale rule pertaining to my situation. l bought 960 shares of a stock in July, sold it within a week and lost about $10,000. l then bought 800 shares back (same stock) at $80.85 about a week later and held. l bought another 68 shares as the stock was falling ($46.XX), and another 500 ($18.22) when it was dirt cheap last week. After the stock rose a little l sold 500 shares to make quick profit on the last purchase. After the sale l noticed that my average share price went way down and it sold the shares that l bought at $80.85, resulting in a roughly $40,600 loss instead of a $790 gain that would have been realized had the shares purchased at $18.22 been sold.

l understand the basis adjustment for one sell then buyback, but if l decide to make trades like this in order to get my money back, does the basis keep adjusting as l make a profit? For example, I've already lost $10k once and $40k another time. Is my basis now $50k, or can you not add losses? l do plan to buy back more shares this week so l wo not be able to report that $40k loss.

Also, if l make my money back and a profit in 2010 on this stock, can l include my losses from this year to offset my gains in 2010 since l wo not be able to deduct this years losses because l repurchased within 30 days?

This is blowing my mind and I'd appreciate any help. Thanks in advance.
Thank you, clark. Is there a certain time frame that l have to make this money back in order to not pay taxes on the money that l make back when l buy more shares?

l already lost $50,000 this year and can not claim a loss since I've bought back within 30 days. Say in two years l come away with a $20,000 profit on this stock after a few trades (assuming no profit is turned until 2010). I will only pay taxes on that $20k profit regardless of how many times l trade it, right?

You would add your prior losses to the current cost of the stock.

If you bought it at $20000, sold at 10000 then bought it back for 5000, you would have a basis of $ 15000 (20K-10K+5K).