I helped a friend to invest in stocks and told him that I would pay him to cover the net loss. Now, according the tax form (it was Form 1099), the loss was 2000 (it shows -2000 on the form) and the Wash sale disallowed is 100 (it shows 100 on the form). Should I pay him $2000 or $2100? Thanks.
If he lost $2,000, then his loss was $2,000, no matter what the 1099 says. So if he started with 10k and he now has 8k and you said you would make it good, his real loss is 2k and that's what you owe him. However, for tax reporting purposes, his loss may be less than $2,000 depending on how much is disallowed from trading in the same or substantially similar security in the same or any other account (including retirement accounts) within 30 days before or after owning the security (securities) where the loss occurred. It sounds like the 1099 is telling him he may only be allowed to claim $1,900 loss on his 2019 taxes.
